Following a number of uneasy weeks at elevated prices, the gas market is once again rife with bullish signals.

Here is Rystad Energy’s weekly gas and LNG market note from our Gas Markets Analyst Zongqiang Luo:

In Europe, the suspension of Nord Stream 2’s certification process has let bullish momentum take hold again, resulting in higher TTF prices due to the evaporating expectations of any supply relief through this pipeline during the Northern Hemisphere winter.

The Nord Stream 2 setback comes as temperatures in the northern hemisphere have started to drop, and storage levels are down 2.5% on the previous week. The situation is seeing further bullish support from the recent increase in carbon prices, which may cap the extent of gas-to-coal switching in the power mix.

We now estimate that the certification can only be completed around April next year at the earliest, with ample potential for an extension through to August 2022, given the likelihood of an even more stringent evaluation at the next review stage of the European Commission.

Delays in utilizing Nord Stream 2 may have a lasting effect through the region’s 2021 winter and beyond.

Europe may be forced to continue being dependent on an already tight liquefied natural gas market, which suggests an increased likelihood of a sustained high price environment throughout much of next year’s first half if Europe emerges with severely depleted storage.

Russian flows to Europe through Ukraine and Poland have marginally increased on the week, though they remain far short of an adequate level for a cold winter.

Across the Meridian Line, buyers in Asia have problems of their own. Latest developments related to the supply disruption at Malaysia LNG indicate that up to three additional cargoes could be taken off the market each month from December to March, mainly impacting Japanese contracts.

While Japan is likely to be well prepared for this winter, considering improved nuclear power availability and high LNG inventories, disruptions to expected deliveries could leave Japanese buyers with little choice but to return to the brutal spot market, which they have sought to avoid.

We note that Chinese buyers have similarly retreated from the spot market, instead increasing pipeline imports from Russia.

Daily transmissions from Russia to China have been 30% higher than daily contractual volumes so far in November, suggesting a flowrate of nearly 135 million cubic meters per day (MMcmd) compared to the daily contract quantity of 104 MMcmd.

The gas leak at Gorgon LNG Train 1 in Australia poses further upside risk to prices. We estimate that the production loss due to repairs over the next few weeks could take up to three cargoes more out of the market across November and December.

Malaysian and Australian outages has dented the positive developments from improved production at Nigeria LNG and the restart of Equatorial Guinea LNG.

The gas balance in the US continues to improve as weather forecasts slant towards a milder winter outlook, and storage has reached a healthy level of around 3% below the five-year average.

However, upward price support remains in the form of resilient gas demand for power and a continued robust outlook for exports. As such, we maintain an outlook of elevated Henry Hub prices through the end of the year, hovering at around $5.5 per million British thermal units.

Overall, the market sentiment has again turned bullish, albeit capped by softening coal prices, but with little sign of sharp downward correction in the near term unless there are sustained and material incremental flows from Russia to Europe, or if temperatures in the Northern Hemisphere take a turn for the mild.

If flows from Russia don’t increase and if temperatures remain low, indicating a gas-demanding winter, we cannot take another price surge off the table.