The LNG market was again muted as the week got underway with hotter weather and restocking demand still in the offing.
In Europe, the prompt Title Transfer Facility (TTF) gained just a penny in a quiet day of trading amid labor holidays across the continent. The June contract gave up 4% last week to finish a fourth consecutive week of losses.
Liquefied natural gas arrivals remain steady, lifted by labor strikes that ended at French import terminals late last month, where sendout returned to normal levels. Ahead of the holiday, European regulators assessed LNG prices on Friday at a roughly $2 discount to TTF. Steady Norwegian and Russian pipeline imports have also shored up supplies.
Colder weather is still lingering across much of the continent and is expected to persist into next week, but ample gas supplies and storage inventories have kept a lid on prices.
“As summer injection season arrives, Europe is in a safe position, with healthy storage levels approaching the top of the five-year range,” said Rystad Energy analyst Nikoline Bromander.
TTF remains above $12/MMBtu. Analysts at Evercore ISI joined a growing chorus of market watchers in noting that prices are still too high to spur more demand that was lost last year when the cost of natural gas hit record highs.
Storage inventories on the continent are at nearly 60% of capacity, compared to the five-year average of 40%, and are on track to fill by winter at current levels.
Demand also remains weak in Asia, where healthy inventories are cutting into LNG buying. The Japan-Korea Marker also gave up roughly 3% last week.
The market continues to wait for a meaningful rebound in Chinese spot LNG demand, but domestic energy production and pipeline imports appear to be curbing appetites for the super-chilled fuel as the country’s economy continues to rebound from the Covid-19 pandemic. The nation’s coal imports and production also surged in the first quarter.
Bromander said attention is now shifting to the months ahead as El Nino weather conditions that are expected to emerge this summer could bring hot, dry weather to Asia.
“In the longer term, the strong possibility of the return of El Niño remains, suggesting much warmer weather in the Northern Hemisphere in the coming months,” she said. “This will incentivize additional purchases ahead of the summer and increase demand for spot volumes.”
For now, smaller and price-sensitive buyers continue to take advantage of a lull in the market. India’s Gail Ltd. issued a tender to buy three cargoes for summer delivery, according to Kpler data, while PetroVietnam also tendered for its first LNG cargo to be delivered this summer.
In the United States, Henry Hub declined Monday. Fading heating demand and the potential for hefty storage injections in the upcoming weeks pressured natural gas futures lower in Monday trading.
Temperatures are seen warming across much of the United States during the second week of May.
Absent “notably hotter or colder trends,” the May temperature outlook raises the prospect of a run of three or four weekly storage injections close to or surpassing the 100 Bcf mark, NatGasWeather said.
“We expect a hotter than normal summer will provide opportunity for surpluses to decline, but the rate at which they do so won’t be as fast as needed without lighter production or natural gas gaining a greater share of U.S. energy generation,” NatGasWeather added. “As such, the background state will remain bearish until widespread heat arrives and the balance tightens.”
A lightning strike on a Columbia Gulf Pipeline compressor station in Mississippi briefly pushed U.S. prices up by about 25 cents on Friday, but they stabilized after flows were rerouted and impacts of the incident eased.
U.S. feed gas deliveries have also fallen off sharply from recent highs of more than 15 Bcf/d. They’ve hovered around 14 Bcf/d over the last week, but nominations dropped to 13.4 Bcf on Monday. NatGasWeather said maintenance work at U.S. plants is likely to blame as deliveries have slipped at various facilities.
In other news, Adnoc Gas plc signed an agreement to supply an affiliate of TotalEnergies SE with LNG for a three-year term. Volumes and prices weren’t disclosed, but very little new supply is expected to hit the global market before 2025.
TotalEnergies is a major global supplier of the super-chilled fuel and the contract is expected to start this year ahead of the projected supply gaps.
Shell plc also signed an agreement to sell its 27% stake in the Browse natural gas project offshore northwest Australia, saying the asset no longer fits into its global portfolio. The deal would boost BP’s stake in the project to 44%. Terms of the transaction weren’t disclosed.
Browse has been under development since 2018. BP, Woodside Energy Group Ltd., PetroChina Co. and Japan Australia LNG pty Would develop two floating production storage and offloading facilities to produce 11.4 million metric tons/year of LNG and liquefied petroleum gas for export, along with volumes for the domestic market.
