European and Asian natural gas prices continued moving higher last week and again finished strong on Monday as the regions competed for supplies.
Lingering cold in Europe, along with a drop in pipeline imports and a rise in the Japan-Korea Marker (JKM) contract, are supporting prices on the continent, where storage inventories remain about 25% below the five-year average. Below normal temperatures are expected to continue in the UK, France, Germany, Italy, Hungary, Poland, Scandinavia and the Balkans this week, while the 6-10 day period looks more normal, according to Maxar’s Weather Desk.
“All factors support the uptrend right now, as cold spring weather across Europe, supply concerns regarding Russia due to the relationship with Ukraine, and a surging carbon market all support the upturn,” said trading firm Energi Danmark in a Monday note. Day-ahead gas on the Dutch Title Transfer Facility (TTF) hub last week hit its highest level since January, while the front-year contract touched a more than two-year high.
The prompt TTF and National Balancing Point contracts both surged above $8.00/MMBtu on Friday, while JKM futures neared $9.00. Spot prices in North Asia surpassed the $9.00 mark on Monday as prices are being run up amid competition with Europe and an ongoing need to replenish stocks after a cold winter.
Engie EnergyScan also said an outage at the Troll field cut Norwegian pipeline imports to 260 million cubic meters (MMcm) on Friday, down from 306 MMcm on Thursday. Russian supply concerns are growing as military tensions simmer with Ukraine along the border. Russian flows were down slightly to 327 MMcm on Friday versus 329 MMcm on Thursday, Engie said.
Gazprom PJSC said last week that it sees European spring gas demand at levels similar to winter. Despite tensions, the company has reserved additional pipeline capacity via Ukraine. It forecasts shipping 497 billion cubic meters of natural gas this year, up 9.6% from 2020.
Other commodities also climbed last week. The prompt Brent crude contract hit some of its highest levels since March last week and closed higher on Monday. The forward curve suggests the market is growing increasingly confident in a global economic recovery, said Schneider Electric analyst Robbie Fraser.
The Organization of the Petroleum Exporting Countries and its allies, aka OPEC-plus, confirmed it would push ahead with previously announced output increases. The cartel agreed to add, beginning in May, more than 2 million b/d of oil into the market by July amid mounting expectations for rising demand this summer and fall.
In the United States, meanwhile, strong power burns and a three-day rally in Nymex natural gas futures lifted spot gas prices for the April 26-29 trading period, which covered gas delivery through April 30. West Coast markets led the way, boosting NGI’s Weekly Spot Gas National Avg. 8.5 cents to $2.700/MMBtu.
The May Nymex futures contract also expired at $2.925 after three straight days of gains in the face of mild spring weather. Strong export demand carried the load for futures most of the week, but Thursday’s storage data led to a pullback for the new June prompt month contract before it climbed by two cents to finish at 2.931 on Friday.
U.S. liquefied natural gas (LNG) feed deliveries again topped 11 Bcf/d for most of last week.
The shipping sector is also reaping the benefits of a tight global gas market as vessel rates have continued to move upward. Day rates for a 174,000 cubic meter vessel in the Atlantic Basin were at $93,000 on Monday, up from $70,000 at the same time last week, according to shipbroker Fearnleys AS. Vessel rates in the Pacific Basin were at $83,000 on Monday, up from $59,500 a week ago.
There are few ships available in both basins, Fearnleys analysts said, adding that those needing ships in the Atlantic have in some cases sourced them from the Pacific, which is uncommon for this time of year.
Elsewhere in shipping, Cheniere Energy Inc. said the MOL Challenger loaded at its Sabine Pass LNG export terminal in Louisiana last week. The company said it was the largest vessel to ever pick up an LNG cargo in the United States. The ship can transport 258,000 cubic meters of LNG, compared to an average vessel that can carry up to 175,000 cubic meters.
Also on the Gulf Coast, Venture Global Inc. said the Zachary Group and KBR Inc. have formed a joint venture to execute the development, engineering, procurement and construction of the first phase of the Plaquemines LNG export project about 20 miles south of New Orleans. The first phase would have a capacity of 10 million metric tons/year.
In Australia, Santos Ltd. said it would shut down one train at its Gladstone LNG plant for maintenance between May 9 and June 7. Chevron Corp. also said later in the week that it expects LNG production to be cut through June due to ongoing troubles at its Gorgon LNG plant in Australia.
Maintenance has shut down part of the terminal in Australia, which Chevron operates with a 47.3% stake. It temporarily took the system offline last year for repairs after welding cracks were discovered. Inspections for a third train are scheduled to take place into June, with repairs to follow if necessary. But the company expects all three trains to be operating in 3Q2021.
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