Natural gas prices across the world remained strong Tuesday as demand centers competed for supplies.
Prices in Europe weakened Tuesday, but fundamentals continue to support higher prices. Dutch futures climbed throughout last week and hit a record on Monday to settle near $15/MMBtu. The UK benchmark National Balancing Point contract also touched a 16-year high last week.
The run-up in European prices is being driven by concerns that the winter heating season will begin without adequate supplies as storage inventories remain low. Also, Asian buyers continue to outbid for LNG cargoes as restocking demand is high amid hot weather in the region. JKM spot prices for September delivery surged above $16 Tuesday and were near a seasonal high.
“While gas markets around the globe compete with one another for LNG deliveries, the underlying issue of tight global balances has not been addressed,” Wood Mackenzie analysts said late last week. “Price rises each week without any material demand destruction or supply creation. The global gas market will continue to be supportive if this remains the case.”
Prices in the United States have also been strong, trading near or above $4/MMbtu over the last week. Inventories remained tight and hot weather across the country has pushed Henry Hub to its highest seasonal levels in years.
Meanwhile, supply outages have occurred more frequently at producing fields and LNG export terminals across the globe, while demand in other markets like South America is also high amid a drought.
Looking ahead, Schneider Electric analyst Balint Balazs said there are some bearish factors on the horizon. Additional U.S. LNG export capacity is set to come online in 4Q2021. There is also potential for Nord Stream 2 to start flowing by early next year. In addition, the premium between Asian and European gas benchmarks is narrowing.
Those factors could be positives for the tight European market, where gas inventories stood at 57% of capacity this week — the lowest level ever recorded for this time of year, according to market research firm Kpler. As European prices have crept upward, the profit margins from the United States to both Asia and Europe have narrowed, reversing a trend over the last month that made it more attractive to send U.S. cargoes to Asia.
If the premium remains narrow, more LNG imports could eventually arrive in Europe and help with supply woes. Russian imports fell Monday, while Norwegian pipeline flows have also been restrained because of maintenance at the Troll field.
Moreover, Gazprom PJSC did not book any of the 63.7 million cubic meters/day of interruptible gas pipeline capacity through Ukraine at a monthly auction last week. It was the fourth consecutive month that Gazprom did not take additional volumes. The company has been booking additional firm capacity to move supplies via Ukraine to Europe. The company also has annual volumes contracted through the rival country until 2024.
Exports from the United States, the world’s third biggest LNG supplier, have continued to run at or near capacity, with feed gas deliveries consistently topping 10 Bcf/d. Venture Global Inc.’s Calcasieu Pass facility and Cheniere Energy Inc.’s sixth train at the Sabine Pass terminal — both in Louisiana — are expected to start exporting commissioning cargoes by year’s end.
Elsewhere in the United States, Stabilis Solutions Inc. said Tuesday it signed a memorandum of understanding with the Galveston Wharves at the Port of Galveston in Texas to develop LNG bunkering operations at the port.
Small-scale LNG provider Stabilis said it would deploy its existing fleet of mobile cryogenic assets, including LNG transportation and distribution equipment, and provide LNG from its liquefaction facilities in Texas and Louisiana to support LNG fueling operations. LNG bunkering services are expected to be available in 2021.
NextDecade Corp., which is developing the 27 million metric tons/year Rio Grande LNG terminal in South Texas and a carbon capture and sequestration project, reported a second quarter net loss of $15.5 million (minus 13 cents/share), compared with a net loss of $9.3 million (minus 8 cents) in the year-ago period. NextDecade remains a pre-revenue project development company. It hasn’t inked enough supply deals to underpin Rio Grande and make a final investment decision.
The company also said Monday that it would issue $5 million of preferred stock in a private placement to an affiliate of Energy & Power Transition Partners LLC. The private equity fund is focused on investing in the energy transition.
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