Warm weather across the Northern Hemisphere continues to drag down global natural gas prices as demand remains weak and supplies are healthy.
Title Transfer Facility (TTF) and Japan-Korea Marker (JKM) futures have fallen by over 30% since the start of winter.
“The key drivers behind falling prices have been a mild winter, ongoing demand weakness and a decline in coal and carbon prices, which set power sector switching range levels,” UK consultancy Timera Energy said on Monday.
Temperatures across Europe, along with those in leading demand centers in Asia, such as China, Japan and South Korea, are forecast to be above normal in the coming weeks.
“Gas demand remains very muted versus historical levels,” Citigroup Inc. said of the European market. In January, the bank said demand on the continent was 32% below the five-year average.
The drop in consumption has helped to preserve storage inventories, which are 68% full compared to the five-year average for this time of year of 54%.
The prompt TTF contract slid 5% on Monday to finish just above $8/MMBtu. It slid 4% last week after jumping briefly, when an unplanned outage in Norway’s massive Troll field took longer than expected to resolve. JKM futures were largely flat, trading below $10/MMBtu throughout the week.
“Fundamentals remain weak in Asia, with buying interest limited to southern Asian countries,” said Rystad Energy analyst Masanori Odaka.
Spot purchases among larger buyers in the region remains limited due to comfortable inventory levels and the Lunar New Year holiday that stretches into this week, Odaka added.
In the United States, unseasonably warm weather and strong domestic gas production sent Henry Hub futures crashing below $2/MMBtu last week. The March contract finished 8 cents lower on Monday and closed at $1.76.
“As any remaining winter risk fades, prices have strongly declined, particularly for near-term contracts, with gas through May trading below $2/MMBtu,” Schneider Electric analyst Robbie Fraser said in a note to clients on Monday. “That continues to be heavily influenced by near-term weather expectations, with most models showing warmer-than-normal conditions across most of the country over the next two weeks.”
The prospect of rapid warming into March could bend the end-of-season storage figure toward 2 Tcf in the United States, “with an oversupplied spring ahead,” according to EBW Analytics Group analyst Eli Rubin.
Last week, weekly U.S. natural gas cash prices remained under pressure for a fourth week as warm February weather limited heating demand across much of the country, while a tanking in natural gas futures contributed to an overriding bearish market sentiment.
NGI’s Weekly Spot National Avg. for the Feb. 5-9 period fell 15.0 cents to $1.965.
LNG feed gas volumes were nominated at 13.8 Bcf/d on Monday, according to Wood Mackenzie. That’s up versus a seven-day average of 13.2 Bcf/d, but below highs closer to 15 Bcf/d in recent months. A train remains offline at the Freeport LNG terminal in Texas due to electrical issues that surfaced after freezing temperatures last month.
In other news last week, National Grid plc. agreed to buy LNG from Constellation Energy in a deal that would keep the Everett import terminal open in Massachusetts. The facility was slated to close in May with the retirement of a nearby gas-fired power plant operated by Constellation. The deal comes after federal officials warned that closing the plant could jeopardize vital supplies for consumers in New England during peak winter weather.
Elsewhere in the United States, the House could vote this week to reverse the Biden administration’s pause of new LNG export authorizations. A floor vote could take place as soon as Wednesday, according to House Majority Leader Steve Scalise (R-LA). Republican lawmakers in the Senate have floated the idea of advancing a similar reversal.
In Europe, Centica plc secured additional LNG supplies for the UK last week, reaching a deal with Repsol SA to buy 1 million tons (Mt) of the super-chilled fuel over a term between 2025 and 2027.
German utility VNG AG has also signed a deal for the country’s first pipeline gas from Algeria. Supplies started being delivered to Italy last month and are then shipped to Germany, Algeria’s Sonatrach said. No other terms of the deal were released. Germany, Europe’s largest gas buyer, has diversified its supplies since Russia stopped delivering gas to the country in 2022.
Meanwhile, in South America, MidOcean Energy said it would acquire a 20% interest in the Peru LNG export terminal from SK Earthon for an undisclosed amount. The plant, which is operated by Hunt Oil Co. and can produce 4.45 Mt of LNG annually, is one of only two production facilities in Latin America.
MidOcean was formed by institutional energy investor EIG in 2022 to build a global LNG portfolio. Last year, Saudi Arabian Oil Co., aka Aramco, made its first investment in the LNG sector by taking a minority stake in MidOcean for $500 million.
