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TTF Plunges to Lowest Level Since 2021 as Natural Gas Supply Outlook Strengthens – LNG Recap
European natural gas prices hit the lowest level since 2021 on Tuesday as warmer weather has eased concerns that the region won’t have enough of the fuel to make it through winter.
The Dutch Title Transfer Facility (TTF) February contract fell to nearly $22/MMBtu on Tuesday. That’s a low not seen since November 2021 before Russia invaded Ukraine and sent natural gas prices soaring to record highs on supply fears.
Unseasonably warm weather has weighed down TTF in recent weeks, giving the market a reprieve and a chance to build storage inventories during the heating season.
“Indeed, relatively weak demand and comfortable supply made European gas stocks switch to net injection mode from Dec. 24, which also helped ease fears for the coming weeks and lower curve prices,” analysts at Engie EnergyScan said in a note to clients Tuesday.
European storage inventories were at 83.5% on Tuesday, up slightly from 83.1% a week ago. LNG imports have also helped replace pipeline gas shipments that have been suspended by Russia.
Liquefied natural gas imports hit 13.1 million tons in December, according to data from Kpler. That broke a previous record of 11.85 Mt set in November. The United States accounted for the bulk of deliveries to Europe, shipping 5.45 Mt of the super-chilled fuel in December. Russia and Qatar were the next biggest suppliers, selling 1.66 Mt and 1.54 Mt to Europe, respectively, according to Kpler.
Uniper SE said Tuesday that the first liquefied natural gas cargo arrived at its import terminal in Wilhelmshaven. The Maria Energy arrived carrying a cargo of roughly 3 Bcf of natural gas, or enough for 50,000 German households. The terminal started operations Dec. 17 after the Hoegh Esperanza floating storage and regasification unit arrived at the port.
TTF declined throughout last week, with a brief reversal on Thursday as the market reacted to varying weather forecasts and baked in the possibility of more competition from Asia. The Japan-Korea Marker (JKM) continues to hold the premium over TTF as demand weakens in Europe and more is expected in Asia later in the winter, but Asian spot buying has remained limited.
Elsewhere in Europe, Bulgaria’s Bulgargaz has signed an agreement with Turkey’s Botas giving Bulgaria access to Turkey’s natural gas network and LNG import terminals for a 13-year term to improve supplies.
Russian President Vladimir Putin also signed an order last week amending a decree in March that required buyers in the European Union to pay for Russian natural gas in rubles. The Kremlin said buyers can now pay in a foreign currency. Russia suspended deliveries to some countries for failing to comply with the March decree. The Kremlin said Tuesday that deliveries would not necessarily restart to those countries if they repaid debt in foreign currency.
Meanwhile, in the United States on Tuesday, Henry Hub nosedived as well. The February contract lost 49 cents to close at $3.98.
Warmer weather is expected across the Lower 48 states through the middle of January, “which is expected to reduce heating demand and drive looser market balances,” said Schneider Electric analyst Christin Kelley.
According to Schneider, natural gas production levels have completely recovered from freeze-offs during a brutal winter storm over the Christmas holiday. Production is trending around 100 Bcf/d after dropping more than 11% during late December.
“These factors should leave inventories at healthy levels over the coming weeks and keep pressure on prices,” Kelley said.
U.S. gas prices saw their biggest monthly decline in four years last month. The market even shrugged off a 213 Bcf withdrawal from storage last week given the lackluster demand caused by warmer weather.
Feed gas deliveries have also dipped in recent days to roughly 11 Bcf from highs of nearly 13 last week. Deliveries to the Sabine Pass export plant have dropped by roughly 1 Bcf, while flows on lines feeding the Calcasieu Pass terminal have dropped by roughly 1 Bcf since last week.
Also last week, Tellurian Inc. said in a regulatory filing that it has amended a sale and purchase agreement (SPA) with Gunvor Group Ltd. to buy supplies from the proposed Driftwood LNG terminal.
The deal was extended by one month to Jan. 31 to meet certain conditions. The amendment also allows Gunvor to end the deal immediately without the 45-day notice required in the initial SPA.
Tellurian would also sell LNG to Gunvor at prices linked to JKM instead of the previous agreement which would have tied prices to a blended average of JKM and TTF. Tellurian has yet to sanction the 27 million metric tons/year Driftwood project and has struggled to land offtakers for the project at a time when contracting activity is at record highs.
Royal Dutch Shell plc and Vitol Inc. terminated SPA agreements with Tellurian last year.
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