LNG cargoes from the US are poised to shift to Asian ports as prices fall in Europe.
That’s the view of Rystad Energy’s gas and LNG market update from senior analysts Masanori Odaka (Tokyo) and Ade Allen (New York):
Gas prices on the Netherlands-based Title Transfer Facility (TTF) fell 14% to around $9.4/MMBtu as of 11 July due to weak demand and healthy supply, the Report said.
In Asia, spot LNG prices are fluctuating around $11/MMBtu for August delivery as of 11 July, with the monthly average expected to settle at $12/MMBtu or slightly below.
This has incentivized some players with US free-on-board LNG cargoes to direct their LNG towards Asia rather than Europe.
However, finding Asian importers may be difficult as some countries still face high inventory, subject to demand fluctuation during summer.
Supply from the US remains robust, though some decline in LNG exports may be expected due to possible issues at Sabine Pass Train 3.
Europe
Spot LNG prices for northwest Europe delivery were about $8.9 per MMBtu on 11 July, 18% lower on the week.
High inventory, muted demand and weak economic growth globally weigh heavily on prices, although there is still a risk of higher prices due to political uncertainty.
Europe continues to inject gas into storage, with storage levels well above 2021 and 2022 for this time of the year.
Storage facilities are currently 80.1% full at roughly 90.9 Bcm, well positioned to reach the 90% target before November.
The withdrawal rate is currently around 29.8 MMcmd at an injection rate of 279 MMcmd.
At the country level, UK storage is 56% full, with France at 66% and Germany at 83%.
Europe imported 2.4 million tonnes (Mt) of LNG last week (week 27), 36% higher than the same week of 2022, with France leading with 0.6 Mt.
However, high winds in week 27 reduced import capacity in the North Sea, as some equipment was damaged at the 1.6 Mt per year Elbehafen LNG terminal in Brunsbuettel.
Gas consumption fell 10% in major countries such as Germany, France, and the UK last week compared to late June.
On the gas supply side, Norwegian flows have recovered to 243 million cubic meters per day (MMcmd) on 11 July with the return of fields, including Norne and the Kollsnes onshore facility, from planned maintenance.
The Aasta Hansteen field and the Nyhamna processing plant are planned to end maintenance on 15 July, while the Troll field is due to end maintenance on 13 July.
Meanwhile, Russian flows were around 85.2 MMcmd compared to 82.1 MMcmd a week earlier.
Regarding weather, France is likely to face above-average temperatures until 21 July, while Germany is predicted to see above-average temperatures until 22 July.
Asia
In the Asian spot LNG market, several sell tenders emerged from Indonesia’s Bontang LNG for September and October delivery, with deadlines on 11 July.
Russia’s Novatek offered LNG for 1-4 September delivery into Asia on a delivered ex-ship (DES) basis.
Russia’s Sakhalin Energy also sold two August and two September delivery cargoes to a major Chinese importer.
On the buy side, pockets of demand emerged from South Asia, while buying interest from East Asian importers remained limited despite strengthening downstream demand in some countries.
On 12 July, the Japan Ministry of Economy, Trade, and Industry reported major Japanese power utilities’ combined storage levels of 2.07 million tonnes (Mt) of LNG as of 9 July, some 9% lower than the 2.28 Mt reported in the same period last year, and 21% higher than the five-year average of 1.95 Mt.
This is lower than the inventory held at the end of July 2022 at 2.28 Mt and similar to the average LNG stored between 2017 and 2021 at the end of July at 2.08 Mt.
A combination of high humidity during the rainy season leading to more demand for power and less power generation from renewable sources such as solar have contributed to more robust downstream demand.
Related Articles
