Sendout at French LNG terminals has returned to normal levels as labor strikes that started early last month have for now ended, boosting European import capacity and helping to keep the lid on natural gas prices there.
Eleven cargoes have unloaded at France’s four import terminals over the last week, according to Kpler vessel-tracking data. That’s helped keep a steady stream of liquefied natural gas flowing to the continent, which has also limited the impact of cold weather across much of the continent on natural gas prices.
Cold is expected to continue throughout the week, but LNG arrivals are maintaining a record pace at the same time as Russian, Norwegian and Algerian pipeline supplies are steady and storage inventories are strong. Kpler data shows LNG imports are on track to reach 47.72 million tons (Mt) through the first four months of the year, up from 42.94 Mt over the same time in 2022.
“Summer is approaching and Europe is in a healthy, safe position as injection season begins, boasting storage levels in the top range of the five-year average,” said Rystad Energy analyst Nikoline Bromander.
The May Title Transfer Facility (TTF) contract shed three cents Tuesday, while June inched upward slightly, but both contracts continue to trade below $13/MMBtu. Meanwhile, the glut of cargoes arriving in Northwest Europe has pushed delivered ex-ship (DES) prices there to $1.93 below TTF, according to the latest assessments from Spark Commodities. Similar discounts were seen in Southwest Europe, where Spark assessed DES LNG cargoes at $1.86 below TTF.
European natural gas prices still remain high compared to historical averages. As a result, the European Union’s (EU) statistical office said last week that natural gas consumption dropped 17.7% between August 2022 and March, compared with the same period over the previous five years.
While EU storage inventories are at 58% of capacity, compared to the five-year average of 38% for this time of year, the pace of injections remains below historical averages. Tudor, Pickering, Holt & Co. said Friday that inventories built by roughly 24 Bcf over the prior week, compared to the five-year average build of 42 Bcf.
At this point, the pace would need to accelerate to meet the bloc’s target of filling storage to 90% of capacity by winter. Fears of Asian buyers returning to the market to compete more strongly for cargoes also have the market on edge.
The EU’s new tool for aggregating natural gas purchases opened on Tuesday, allowing buyers to submit gas demand projections for the next year that can be met by sellers. The EU is aiming to start joint gas purchases to help fill storage before the summer starts, but it’s targeting just a fraction of the bloc’s overall demand.
Weak Demand in Asia
Cooler temperatures have also settled over much of North Asia this week, but storage inventories remain strong in the region as well. Meanwhile, heat waves in India, parts of China, Thailand and Bangladesh this month have created some spot LNG demand, but not enough to lift prices in the region.
Japan-Korea Marker (JKM) spot prices have dipped below $12 on lackluster demand.
“Supply and demand dynamics in the Far East remain weak, with end users on the offer in summer and a real dearth of demand,” said Tobias Davis, head of LNG in Asia for broker Tullett Prebon.
He added that rangebound JKM prices have put the market in “no man’s land,” with the flat spread between Asia and Northwest Europe currently steering the direction of futures trading volume.
Natural gas prices also fell across the curve in the United States on Tuesday, with the exception of the May Henry Hub contract, which gained ahead of expiration. May futures settled at $2.307/MMBtu, up 3.4 cents on the day. June futures slipped by the same amount to $2.437.
U.S. LNG feed gas demand has helped provide a floor for faltering prices in the country. Deliveries to export terminals have hit records of more than 15 Bcf/d this month as steady natural gas production and high inventories have weighed down Henry Hub.
EBW Analytics Group said in a note to clients last week that additional feed gas demand could kick in over the next month or two at Freeport LNG, which has been ramping back up following an explosion last year.
Another loading dock and storage tank are scheduled to come back into service at the terminal in the next 30-60 days further lifting operational constraints.
EBW analyst Eli Rubin noted, however, that other U.S. LNG producers “may be looking ahead to a softer autumn season after European natural gas storage has filled – and netback margins likely compress – to conduct maintenance activity.” He said “LNG could remain stronger than anticipated this spring” as a result.
Rubin said Tuesday that natural gas trading is likely to be “choppy” heading into the May contract expiration on Wednesday.
Feed gas nominations dropped from 15.49 Bcf/d over the weekend to 14.38 Bcf on Tuesday, while EBW estimates showed U.S. gas production back at a three-week high. Both helped to keep prices down.
The drop in feed gas nominations was led by declines at Freeport and the Corpus Christ LNG terminal. Earlier this month, Criterion Research LLC’s James Bevan, director of research, said he expected one train at the Corpus Christi facility to go down for planned maintenance sometime this quarter. The analyst also expected a turnaround at one or two trains at Sabine Pass.
In other news last week, Bloomberg reported that worker strikes at ExxonMobil operations in Nigeria that have delayed oil loadings were also having limited impacts on the Nigeria LNG terminal. Nigeria was Europe’s fifth largest LNG supplier last year, but the market has taken little note of labor strikes in the country given ample supplies from elsewhere.
Germany’s government also moved forward with a plan to ban the installation of oil and natural gas heating systems last week. The governing coalition in Europe’s largest gas consuming nation wants to require heating systems to use 65% renewable energy in new and old buildings. The bill still has to pass parliament when it comes up for a vote in June.
