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Global Natural Gas Benchmarks Surge in Chaotic Day of Trading – LNG Recap
Natural gas prices surged worldwide on Monday as the threat of further Russian supply cuts again loomed over a tight market, particularly in Europe where the Dutch Title Transfer Facility (TTF) contract shattered previous records.
The prompt TTF settled at $81.52/MMBtu Monday, nearly 15% higher than Friday’s close and well above the $72.765 record set in March shortly after Russian President Vladimir Putin ordered the invasion of Ukraine. The contract hit nearly $86 in intraday trading and TTF for November and December settled above $82.
“The market remains highly concerned about the supply situation,” said trading firm Energi Danmark in a note to clients. Gazprom PJSC said Friday it would stop all flows on Nord Stream 1 (NS1), the largest pipeline serving Europe, from Aug. 31 to Sept. 2 for maintenance on the system’s only operating turbine.
Energi Danmark noted that “the market fears it will not come back online” when the maintenance ends. Gazprom said service should return to 20% of capacity “provided that no malfunctions are identified.” Deliveries on the system have been reduced to 20% of capacity since July, which Gazprom has blamed on sanctions interrupting its scheduled maintenance operations.
“We have a very critical winter right in front of us,” German Economy Minister Rober Habeck reportedly said Monday. He was in Canada to discuss energy supply. “We must expect Putin to further reduce gas.”
The UK’s National Balancing Point also soared Monday to $62.03/MMBtu from $54.32 at the end of last week. Rising European gas prices are also pushing power prices to record highs on the continent.
“Europe is now facing a parallel gas and power crisis,” said UK consultancy Timera Energy.
Norway reported 34 million cubic meters of planned and unplanned gas outages as the week got underway, which was further pressuring gas prices. Habeck also said Sunday that Germany will not keep three nuclear power plants online. The facilities are scheduled to close by year’s end and would only cut natural gas consumption by 2%, according to Habeck.
However, nuclear availability issues, depleted hydropower levels and declining coal-fired power output are all straining Europe’s grid, Timera added.
“The influence of the rising cost of gas driving up power prices is well understood,” the consultancy said. “What is receiving less attention is a rapidly accelerating power crisis which is driving a renewed surge in gas prices.”
European storage inventories stood at 77% capacity on Monday, or slightly above the five-year average. If NS1 were not to return to service, the continent’s goals of refilling inventories quickly could be jeopardized.
Asian LNG prices jumped Monday over fears the market could become even tighter if Russian deliveries are cut further. Spot cargoes in the region are on offer for above $60/MMBtu.
The Japan-Korea Marker spot price has been gaining for more than a month, hitting its highest point since March last week and climbing since. Hot weather in North Asia has helped to deplete stocks and larger buyers like Japan and South Korea have returned to the market to rebuild inventories.
On the supply side, a strike at Shell plc’s floating liquefied natural gas vessel offshore Australia, which has impacted cargo deliveries in the Asia-Pacific region since June, was extended to Sept. 1.
Chaos in the global market also pushed prices in the United States higher Monday, “where Henry Hub futures could be poised for a test of the psychological $10/MMBtu level in the near future,” said EBW Analytics Group analyst Eli Rubin.
The September contract hit an intraday high of $9.982 Monday, while highs further down the curve surpassed $10. Weekend weather forecasts were mixed and U.S. storage inventories remain below the five-year average, but overseas price action continues to move U.S. futures.
“Although U.S. markets are insulated from the impact of rising European LNG demand, with exports capped by infrastructure limitations, the bullish sentiment of global gas markets may still be influencing U.S. natural gas traders,” said Schneider Electric analyst Christin Kelley.
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