Natural gas prices settled back this week in Europe and the UK, continuing the pullback from the previous midweek highs. Likewise, LNG futures continued to pull back all week. Dutch benchmark natural gas futures are still up well since the beginning of June bouncing off a more than two-year low of Eur23.25/MWh on June 1. TTF closed the week at €32.51, a loss of 7.14% for the week. Prices have settled back after TTF month-ahead price rose by more than 30% intraday on June 15 to almost Eur50/MWh before falling back. UK gas prices also closed lower at 83.3500 GBp/thm to close the week down 4.42%.
Energy prices continue to be at the fore as Europe prepares by winter as we saw mentioned in both Bank of England and ECB meetings over the past weeks.
We have settled back after the move the prior week after the Netherlands talk it will close Groningen gas field, Europe’s biggest gas site a month earlier than expected. At the same time maintenance at the key Nyhamna gas processing facility was extended by more than three weeks until July 15. With that record trading on ICE added to the gas price volatility.
Other price catalysts are warm weather in much of Europe leading to higher demand for electricity and signs of increasing competition from Asia for liquefied natural gas (LNG) due to a heat wave in parts of Asia.
In comparison the US benchmark HH rose 3.17% for the week. Europe NG storage is at 75.1% of capacity. That is +29.3% vs 5yr avg
Power-sector gas demand has been weak. Strong renewable generation and weak overall power demand have weighed on gas-fired output, even with gas ahead of coal in the merit order Argus reported.
Dutch TTF Futures
Prices continued higher after they reversed hard last week after having fallen sharply despite the first of two periods of heavy maintenance at Norwegian fields and processing facilities this summer has begun, curtailing Norwegian production. European gas hub prices even fell on the day that an unplanned shutdown was announced at Norway’s 4.2mn t/yr Hammerfest LNG export terminal. However, that maintenance has been extended another 3 weeks which helped move futures higher.
Dutch TTE Futures
Record TTF Futures and Options Volume
Commodity exchange operator ICE saw a new record number of TTF gas futures and options traded for a single day on June 15, an ICE spokesperson said June 16. A record 660,504 TTF futures and options contracts were traded June 15, including an all-time daily high for TTF futures of 575,970 contracts.
“TTF had another record volume day yesterday [June 15],” the spokesperson said.
The record trading on ICE comes amid renewed European gas price volatility. The TTF month-ahead price rose by more than 30% intraday on June 15, hitting a peak of almost Eur50/MWh before falling back.
Open interest in TTF futures and options is currently 2.88 million contracts, up by 48% year on year and by 79% since the start of 2023.
ICE announced that a record number of TTF natural gas futures and options traded during May 2023 as the market manages natural gas price risk exposure. A record 5.7 million TTF futures and options traded during May 2023, equivalent to a record 4,158 Terawatt hours.
Liquidity in ICE’s benchmark TTF market has grown strongly in 2023 with open interest up 37% year-over-year (y/y) at 2.6 million contracts, the highest level since January 2022. In addition, ICE is seeing record market participation in its TTF futures and options markets, with hedging out to December 2031.
“ICE TTF is the global benchmark for natural gas. The TTF futures market sends price signals which market participants rely upon to manage their global natural gas price exposure, as well as pricing the flow of natural gas in Europe,” said Gordon Bennett, Managing Director of Utility Markets at ICE. “The success of the TTF derivatives market in sending these critical price signals has helped Europe balance supply and demand for natural gas, as well as identifying and clearing infrastructure bottlenecks that were created due to the changing flows of natural gas caused by the material reduction of gas flowing from Russia.”
TTF to Northeast Asian (ANEA) LNG
As the TTF front-month price has fallen, it has moved to a discount to Argus’ northeast Asian (ANEA) LNG-delivered price for the same period, although the discount was still too small to cover the additional transport costs associated with sending an Atlantic-basin LNG cargo the longer journey to northeast Asia rather than Europe. The TTF front-month market first moved to a discount to the ANEA contract on 16 May, and has closed below it in the three most recent assessments.Oscar Mahony – Argus
European Natural Gas Quick Look
Norway Gas to Europe
Concerns over Norwegian supply affect price movements in TFF futures.
- Nyhamna processes gas from the Ormen Lange and Aasta Hansteen fields, which also remain shut in while the extended maintenance at the processing plant takes place.
- Shell serves as the technical service provider for the Nyhamna plant, while Gassco is operator for the facility.
- Nyhamna became operational in 2007 initially to process gas from Ormen Lange, with gas from Aasta Hansteen now also delivered via the Polarled pipeline into the facility.
Nyhamna was taken offline on May 19 for annual maintenance impacting all of its 80 million cu m/d of capacity. Maintenance at the key Nyhamna gas processing facility was extended by more than three weeks until July 15. It had been expected back on June 14, but the restart was pushed back first to June 21 and then to July 15.
Shell said that during the planned maintenance work at Nyhamna, gas formation with hydrogen was discovered during cleaning of a water-based cooling system in the process plant. All non-critical work at the facility was stopped and an investigation group established, Shell said.
Gas from the Dvalin field, currently also shut in will also feed into Nyhamna.
European Energy Crisis Watch
Natural gas prices had been held hostage to the restricted flow of Nord Stream from Russia and the hot weather sweeping the USA. The energy crisis pounding the world with unheard of prices was impacting the domestic pricing. In Europe we saw record highs again but since then prices collapsed from newly sourced supply and less severe weather coupled with collapsing industrial demand.
Threats to Europe “include potential outages in gas-exporting Norway, an economic rebound in China, and renewed competition for cargoes from southeast Asia if LNG prices keep falling could deplete Europe’s inventories, said Eugene Kim, a research director at energy-consulting firm Wood Mackenzie. In that scenario, “the onus to refill will be even higher,” he said.
Catalysts to watch:
- Hotter or colder weather hitting demand.
- Russia halting transfer.
- German rationing
- French nuclear power
- Freeport LNG
- Norway supply
- Putin constant threats
Norwegian exports to Europe were nominated at just 226mn m³ for today, the lowest for any day since 8 June last year.
Daily Europe Natural Gas Inventory Watch
The European Union wants utilities to refill stockpiles during the summer injection season to 90% of capacity by Nov. 1. Gas stockpiles in northwestern Europe (Belgium, France, Germany and the Netherlands) were currently about 56% of capacity, about 63% above its five-year (2018-2022) average for this time of year, Refinitiv said.
Argus said this has lifted aggregate EU stocks to 745TWh, equating to 66pc of capacity, and well above the 473TWh a year earlier. The European stock build has picked up over the course of May, with net EU injections averaging 3.83 TWh/d on 13-21 May, up from 3.05 TWh/d earlier in the month and 1.58 TWh/d in April, according to the latest GIE transparency platform data.
Daily EU NG inventory by year. Europe NG storage is at 75.1% of capacity. That is +29.3% vs 5yr avg.
U.S. gas inventories are about 66.9% of capacity. That is +39.1% vs 5yr avg of capacity. Since the turmoil after the Russian invasion prices have come down with storage build, warmer weather, wrecked economy meaning less energy demand.
European LNG Imports
- LNG plus Norwegian, Algerian, Azerbaijani pipeline imports compensate for Russian supply shortfall
- Europe LNG processing operating at full capacity
- Record shipments of liquefied natural gas (LNG) to Europe so far in 2022/23
Sustained brisk LNG send out has bolstered available supply for injections. Aggregate European send out, including the UK was 4.89 TWh/d on 1-21 May, up from a three-year average of 3.61 TWh/d.
Natural Gas Feed to US Facilities
Sabine Pass, Cameron, Elba Island, Cove Point, Freeport & Corpus Christi combined.
On Friday March 25, 2022, from a EU/NATO meeting in Poland, the Biden administration and European Union (EU) leaders announced a new effort to ensure Western supplies of natural gas to the continent through 2022 and beyond. The United States and the EU now have a joint goal to send an additional 15 billion cubic meters of LNG to EU countries in 2022, about 1.5 Bcf/d, with “expected increases going forward,” according to the White House.
U.S. exporters have little room to ramp up more in the near term, and Western governments do not have the power to order private companies in the LNG market to direct shipments to Europe.
European Natural Gas Demand
EU’s largest gas consumption:
- Households 37% of total demand,
- Electricity and heat generation around 30%
- Industrial consumption around 30%
Demand switching and destruction across Europe, overall gas demand down more than 19% in May on 5-yr avg @ICISOfficial data show.
EU implements voluntary 15% cut to consumption.
Products which are most exposed to energy and gas prices in Europe as a feedstock or utility via ICIS Margin Analytics
In April, savings were 10% below ave. @ICISOfficial data show.
- EU only -18%
- DE -21%
- GB -24%
- IT -11%
- NL -29%
- FR -23%
- ES -5%
Not temp adjusted.
With Germany the epicenter of Russian gas bans the real threat of demand destruction is plain for all to see. Germany’s trade balance came in at minus €1bn in May 2022, which is the first negative print since 1991 due to its energy problems & weakness in manufacturing.
Energy Price Matrice Performance
Henry Hub was the worst performing future in the first quarter of 2023. Natural-gas prices on the New York Mercantile Exchange lost 53% in the first three months of the year and fell to their lowest finish in about two-and-a-half years earlier in March. Moving forward weather, ETF speculation and the strength of LNG demand will determine U.S. natural-gas prices. Remember natural gas prices are majority affected by domestic actions, for the US the variance is exports, that is Mexican pipelines, Canadian imports and LNG exports.
- All that is left of Russian gas flows to Europe is one operating point in Ukraine via Sudzha.
- TurkStream the only other pipeline still in operation supplies gas to Russia ‘friendly’ nations
- Nord Stream I and II pipelines damaged by explosions, zero flows to Europe
- LNG plus Norwegian, Algerian, Azerbaijani pipeline imports compensate for Russian supply shortfall
Europe has historically depended for close to 40% of its annual gas consumption on Russian supplies, imported via four routes – Ukraine, Belarus-Poland as well as the Nord Stream 1 and TurkStream corridors linking Russia to Germany and Turkey via the Baltic and Black Sea, respectively.
Overall Russian pipeline supplies were limited throughout 2021 and further reduced in 2022. By the end of last year Russian pipeline supplies fell to less than 10% of Europe’s total gas imports compared to 40% in the previous year.
Russian volumes shipped through Ukraine to Europe are now at third of what they should be as part of a five-year transit agreement
Russia has banned exports of gas to several EU countries, and the Nord Stream I and II pipelines have been damaged. In 2022 flows via Yamal and Nord Stream 1 stopped completely.
European petrochemicals players faced even higher gas prices as a result, though these have since collapsed to pre-war levels. Fertilizer companies – where gas can account for 80% of costs – have been forced to curtail production. Chemicals were affected, especially those with high exposure to gas prices through utilities or feedstocks. Via ICIS
Russia stopped publishing total gas production numbers in August. At that point, YTD output was down 171 Mcm/d. However, in Q3 it was down a whopping 380 Mcm/d. By comparison, Gazprom alone is down 214 Mcm/d YTD, which hints at smaller producers having more trouble @ira_joseph
++Charts via KnovaWave @knovawave RonH @RonH999 – Visit Ron for daily updates
From The TradersCommunity US Research Desk