Europe’s first cold snap of the season arrived over the weekend, further cutting into natural gas storage inventories and helping to push prices higher Monday.
Already low storage inventories on the continent were cut to 66.8% of capacity from 67.5%. Maxar’s Weather Desk said Monday that the one- to five-day timeframe shows wide-spread “below, much below and strong below anomalies’ ‘ favoring Norway, Sweden, Finland, the UK, Germany and Italy as an upper level trough builds across northern and central Europe. Warmer weather is expected in western Europe over the next six to 10 days.
If storage is depleted at a rate similar to the five-year average, the continent could end winter with natural gas inventories at just 21% of capacity, according to Rystad Energy.
After opening higher last week, British and Dutch futures prices largely moved sideways. The prompt contracts were stable at around $31/MMBtu until Friday, when warmer weather remained, pipeline imports were stable and Asian prices declined. They closed slightly higher Monday.
The continent continues competing with Asia for liquefied natural gas (LNG) cargoes as supplies remain tight. European LNG imports were up last month to 6.8 million tons (Mt), compared to 5.7 Mt in October, Rystad said.
Given low storage inventories and LNG competition, traders continue to monitor Russian exports to the continent as delays in bringing the Nord Stream 2 pipeline online persist. Day-ahead capacity bookings by Gazprom PJSC are being watched more closely as the company has continued to opt against taking capacity at monthly auctions.
“Gazprom will rely on day-ahead capacity booking on the Yamal-Europe pipeline throughout December, which could inject some volatility into prices as traders are left guessing how much volume will materialize day-to-day,” said Rystad analyst Kaushal Ramesh.
Gazprom said last week that its exports to countries outside the former Soviet Union jumped 6% year/year to 171.5 billion cubic meters between January and November.
“Russian gas flows are steady week-on-week, yet still significantly below the seasonal norms,” said Schneider Electric analyst Aidana Childebayeva on Monday.
Carbon prices have continued to set records in Europe as well. They traded above 80 euros/metric ton on Friday for the first time ever as regulators continue to signal more stringent environmental policies and high natural gas prices have made coal more attractive. The jump “may throw a spanner in any plans for runaway gas-to-coal switching,” Ramesh said.
In North Asia, spot LNG prices fell into the mid-$33 range Monday, but supplies in the region remain tight as outages at Gorgon LNG, Malaysia’s Bintulu LNG and Royal Dutch Shell plc’s Prelude floating LNG terminal offshore Australia are forcing more buyers to the spot market to secure January supplies. An electrical fire onboard the Prelude vessel late last week forced Shell to evacuate most of its personnel.
In the United States, natural gas prices continued to crater on Monday, when they finished 47 cents lower at $3.657 for January. A balmy weather forecast for December across much of the country has weighed on prices, leading to the most bearish stretch for the Henry Hub contract in seven years as it dropped by more than 20% last week.
NGI’s Weekly Spot Gas National Average was down 86.5 cents to $4.145 on Friday.
Export demand is booming, however. Feed gas deliveries to U.S. export terminals once again jumped to about 12.4 Bcf over the weekend and were nominated just below that level early Monday.
In other developments, Qatar Energy said Monday that it has entered a long-term sale and purchase agreement with Guangdong Energy Group Natural Gas Co. Ltd. to supply 1 Mt annually to China over a 10-year period starting in 2024. China continues to secure longer-term LNG supplies amid a volatile spot market and energy shortages.
PAO Novatek, Russia’s largest independent natural gas producer, also signed an agreement with PetroVietnam Power last week to cooperate on LNG infrastructure projects. The deal is aimed at meeting growing power demand in Vietnam. Novatek is building the Arctic LNG 2 export terminal and has a 50% stake in Yamal LNG in Russia’s Far North.
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