The European natural gas market was unfazed by colder weather and weak deliveries from Russia and Norway on Monday, when prices dropped amid a broader outlook that remains largely unchanged.

Lower temperatures in Northwest Europe are forecast this week, while freezing temperatures and a drop in wind power in the UK prompted the grid operator there to ask households to cut energy consumption in an emergency measure.

Norwegian natural gas nominations were down to about 10.5 Bcf on Monday from 11.3 Bcf on Friday, while Russian flows were nominated at just 670 MMcf, compared to 1.3 Bcf earlier in the month. 

But gas prices Monday were “trading flat with no changes in fundamentals,” said Schneider Electric analyst Safa Sen. The Title Transfer Facility (TTF) fell by roughly 1% and finished above $21/MMBtu. 

Temperatures on the continent are expected to ease next week, when more seasonal norms should arrive and above-normal temperatures are forecast for some regions, according to Maxar’s Weather Desk.

Storage inventories were at 78.4% of capacity, down from 81.5% a week ago, but well above the five-year average on a steady supply of LNG. Forecasts are increasingly favoring inventories to be at or above 50% of capacity by the time the withdrawal season is over. 

“In fact, if Europe exits the winter with above-average inventories, Chinese demand remains weak and local gas coffers relatively full, limited global storage capacity could lead to an uptick in floating liquefied natural gas – and substantial discounts in LNG pricing – in early fall as storage fills in the leadup to winter 2023-24,” said EBW Analytics Group analyst Eli Rubin in a note to clients last week.

Europe continues to make progress building out infrastructure to take in more gas. Germany’s third floating storage and regasification unit, the Hoegh Gannet, arrived at Brunsbuttel last week, where it will begin being integrated into the terminal infrastructure operated by a unit of RWE AG. 

However, the Economy Ministry acknowledged Monday that it would take until 2026 to build 56 billion cubic meters, or nearly 2 Tcf, of domestic LNG import capacity to displace what it imported by pipeline from Russia in 2021. 

As part of efforts to strengthen the European gas market and continue displacing Russian gas, the European Union’s (EU) Agency for the Cooperation of Energy Regulators (ACER) published its first daily LNG spot price assessment last week. ACER said LNG prices in Northwest Europe were assessed at $18.05/MMBtu and at $16.96 in South Europe on Monday. 

The European Securities and Markets Authority and ACER also reported on Monday that the EU’s natural gas price cap policies haven’t appeared to impact trading, but they stressed that the bloc’s price control mechanism hasn’t been tested. 

Both agencies concluded markets and trading activities haven’t appeared to be affected since mechanisms were instituted in December, but future impacts couldn’t be ruled out if Europe’s natural gas supply is placed under further pressure. EU regulators also included a moratorium on activating the price cap until Feb. 15 in order to give time to study the market implications involved.

Researchers with the ESMA wrote that “some of the potential effects in the trading and clearing environment might only unfold” when gas prices reach the threshold to activate the control mechanism. So far this year, prices haven’t come close to reaching the scenario of holding above 180 euros/MWh, or roughly $57/MMBtu, for three business days that would trigger the EU’s cap.

Freeport Restart In Sight

Spot prices in Asia have also been below the $20 mark amid a lull in buying ahead of the Lunar New Year holiday. 

Shell plc’s Prelude floating LNG vessel offshore Australia, which largely serves customers in Asia, loaded its first cargo last week after a fire in December knocked the vessel offline. The Methane Becki Anne loaded a cargo at Prelude on Jan. 16 for delivery in the Far East next month, according to Kpler data. Shell has not said whether operations have restarted at the plant. 

U.S. natural gas prices have also been sluggish, finishing 7% lower week/week last Friday amid mild weather and elevated production. Natural gas futures rallied Monday as weather models over the weekend showed a significantly colder temperature outlook for the country heading into early February.

Freeport LNG’s mid-January target to partially restart operations after a June fire and explosion continues to slip out of sight. Rystad Energy analyst Emily McClain said last week that the firm now expects a partial restart at the 2.38 Bcf/d terminal in March “at the earliest,” with a full ramp-up not expected until mid-year.

Freeport LNG Development LP said Monday that it has completed repair work at the facility on Quintana Island, TX. It asked the Federal Energy Regulatory Commission to start taking the initial steps to restart operations. Those include reinstating boiloff gas management and cooling down a piping system so it can handle transferring LNG to dock one at the facility. 

In other news as the week got underway, an affiliate of Abaxx Technologies Inc. said Monday that it has submitted LNG futures contract specifications for regulatory review to the Monetary Authority of Singapore, where it operates. 

The contracts, including those for transactions in Northwest Europe, North Asia Pacific and the U.S. Gulf of Mexico, would be listed on the Abaxx Commodities Exchange. They would be a physically-settled alternative to the financially-settled financial instruments that currently dominate the LNG market. 

“The futures contracts are designed to address the price discovery and risk management needs of energy market participants trading LNG,” Abaxx said.