Gas prices on the Netherlands-based Title Transfer Facility (TTF) are up 20% week-on-week to around $10.7 per million British thermal units (MMBtu) as of 25 July due to heatwaves in Italy, Greece, and Spain.
However, further upside momentum has been dampened by continuously high underground gas storage levels in Europe.
In Asia, spot liquefied natural gas (LNG) prices are fluctuating around $11 per MMBtu for September delivery, close to long-term contract prices indexed to oil.
The incentive to send US free-on-board (FOB) LNG cargoes to Asia via the Panama Canal rather than to Europe persists. Supply from the US remains robust with the recovery of Sabine Pass Train 3 following a two-day disruption in week 29.
Europe
The spot LNG price for northwest Europe September delivery was approximately $10 per MMBtu on 24 July, around 15% higher on the week. High inventory, muted demand and weak economic growth globally have weighed heavily on prices, although the risk of upward price movement remains due to political uncertainty.
Europe is continuing to inject gas into storage, with storage levels for this time of the year well above 2021 and 2022 levels.
Storage facilities are currently 84% full at roughly 95 billion cubic meters (Bcm) as of 24 July, well positioned to reach the 90% target before November.
The withdrawal rate is currently around 6.85 million cubic meters per day (MMcmd) at an injection rate of 458 MMcmd.
At a country level, UK storage is 72% full, with France at 73% and Germany at 86%.
The largest drop came from France which imported 0.39 Mt in week 29, 41% lower than the 0.66 Mt a week earlier.
Meanwhile, Italy’s LNG imports rose by 45% on the week to 0.29 Mt from 0.2 Mt in week 28.
Elsewhere, hot weather in Spain has strengthened gas demand for power generation, although regasification from Spain’s seven LNG terminals averaged approximately 600 gigawatts-hours (GWh) per day from 1-20 July, the lowest for any month since September 2021.
On the gas supply side, Norwegian flows have recovered to 256 MMcmd as of 24 July with the return of some fields from planned maintenance, such as Aasta Hansteen and Ormen Lange.
The Dvalin field is scheduled to end maintenance on 28 July.
Meanwhile, Russian flows were at approximately 94.5 MMcmd compared to 92.13 MMcmd a week earlier.
In terms of weather, Germany is predicted to see above-average temperatures from 28 July to 1 August, with the UK expected to face above-average temperatures from 27 July to 1 August.
Asia
Asian spot LNG prices rose 6.7% on stronger downstream gas demand in various regions facing heatwaves.
However, high LNG storage levels have so far been sufficient for strengthened demand, leading to some Asian importers still taking a wait-and-see approach for additional spot LNG purchases.
Pockets of demand have emerged from South Asian importers such as Indian Oil Corporation for 23-26 August delivery and Bangladesh’s RPGCL for 11-12 September delivery.
Jera Global Trading bought a 14-16 September delivery cargo from Shell at $11.25 per MMBtu on 21 July.
Meanwhile, Kansai Electric sold a cargo on an FOB basis scheduled to load at Cove Point on the US east coast on 12 August, while chartering out its Gui Ying LNG carrier at approximately $100,000 per day for three months, according to market participants.
In the downstream market, major Japanese power utilities reported on 26 July a combined storage level of 1.98 Mt of LNG as of 23 July, some 6.2% lower week-on-week.
This is lower than the inventory held at the end of July last year at 2.28 Mt, and below the average LNG stored at the end of July between 2017 and 2021 at 2.08 Mt.
In Japan, the rainy season ended on 20 July in the Kinki, Tokai and Chugoku regions, and on 21 July in the Shikoku region, roughly 3-4 days earlier than average, while the Okinawa region ended its rainy season five days later than average.
The Kanto region, the demand center with the largest cities, entered the rainy season on 8 June, a day earlier than average after ending the rainy season on 22 July, three days later than the historical average.
Japan’s main cities have been hit by high temperatures, leading day-ahead power transaction volumes to shoot over 1 terawatt-hours (TWh) for the first time this summer, according to data from Japan Electric Power Exchange (JEPX).
Power prices remained largely unchanged as western Japan currently has a total of 10 nuclear power plants running operated by three companies, equivalent to approximately 9.4 GW of baseload power, compared to seven nuclear power plants with approximately 5.2 GW running in July last year.
The additional baseload provided by nuclear power plants led to a reduced need to rely on generating fuels such as coal and LNG.
South Korea has high LNG inventory, with combined LNG inventory higher than the 5 Mt threshold. Higher-than-normal inventory levels in East Asia could dissuade major purchasers in Northeast Asia from spot market purchases.
At the time of writing on 25 July, entities with US-origin LNG cargoes will likely bring their volumes to Asia via the Panama Canal route rather than Europe as the arbitrage is open for October delivery, even when considering the full shipping cost.
Consequently, we will likely see growth of US-origin LNG offered in Asia in the coming months.
US
Dry gas production last week (week 29) averaged 99 billion cubic feet per day (Bcfd), about 1.5 Bcfd lower than the week prior.
Production remains relatively resilient for now, although Rystad Energy’s view is that production could hold steady or decline through the rest of the year.
US gas consumption has been elevated over the last few weeks due to heatwaves across the country.
Temperatures are expected to remain well above normal this week, leading to stronger gas demand for power generation.
US feed gas reached 12.1 Bcfd at the end of week 29.
There was a two-day outage at Sabine Pass from 18-19 July, which caused feed gas to decline by approximately 400 MMcfd.
The issue, which originated from Train 4, has since been resolved and feed gas for the facility returned to approximately 4.3 Bcfd on 20 July.
LNG liquefaction facilities are expected to run near full utilization for the rest of the summer as scheduled maintenance season is ending, unless unexpected issues occur.
LNG exports from the US to Europe have remained resilient, with 28 Mt of US LNG supplied to Europe from January to June 2023, 4.5% higher than over the same period last year.
Due to placid supply and elevated demand, Lower 48 storage saw narrower-than-normal injections of 41 Bcf for the week ending 14 July.
It is noteworthy that 2 Bcf was withdrawn from salt storage in the south-central region, some 22% above the five-year average.
The US supply and demand balance is expected to loosen as supply remains range bound with minimal growth, while gas-for-power demand continues to surpass record highs keeping US consumption elevated along with LNG exports near full utilization.
