Unstable equilibrium gas market, awaiting supply indices

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Unstable equilibrium gas market, awaiting supply indices

In Europe, the resumption of Russian gas flows to Germany at Mallnow and small injections into German storage at Rehden calmed the nerves of traders and prices after a week of volatility

On the other hand, temperatures over the next few weeks are expected to evolve to or below normal over much of northwestern Europe. With storage levels of around 970 TWh, or 2% lower than last week, we are well into the withdrawal season, indicating that price risks are biased upward if volumes from Russia turn out to be inconsistent.

However, this risk may be limited if additional volumes do materialize.

It is still unclear how much they can send, but based on historical trade flows during the October-November period, we estimate that around 2 BCM of additional volumes could be available before the end of the year. What is clear, however, is that this is still less than enough for a harsh winter.

In the United States, the earlier than expected return of assets from Shell’s Mars and Ursa platforms suggests a strengthening of supply in the near term, restoring production in the Gulf of Mexico to near full capacity.

Consistent storage constructions allowed the injection season to be completed at around 3.6 TCF, which is around 3% below the five-year average. Nonetheless, we expect any high TTF and spot price in Asia to reflect an upside risk to Henry Hub prices throughout this winter, with continued risk of unusually low temperatures or unforeseen production constraints.

Sabine Pass Train 6 and Calcasieu Pass are being put into service quickly and are on track to produce test cargoes by the end of the year. The market considers them essential to provide relief this winter, in addition to volumes from Russia to Europe.

Our numbers suggest that the feed gas at Freeport is still fluctuating, having fallen below 500 MCFD on November 5 before falling back to around 1170 MCFD on November 8 and 9, and is expected to remain below rated capacity for both. next few weeks, indicating the loss of another 1-2 cargoes.

In Asia, sharp drops in temperature in China’s northern provinces marked the start of the heating season. However, buyers have largely replenished their LNG stocks.

Our data suggests that imports to China are up 19% and 7% year-on-year in October and September respectively, indicating the level of preparedness for winter demand.

In addition, still high prices could dampen demand, as there is limited room for maneuver to increase domestic wholesale prices. Nonetheless, below normal temperatures could quickly deplete stocks and send buyers back to the spot market, where prices must remain elevated to maintain arbitrage against the TTF.

Due to increasing congestion in Panama, the wait time for vessels without prior reservation has increased to almost 2.5 weeks, resulting in an 8.5% increase in Gulf Coast LNG charter rates from the United States to Asia week after week.

However, the availability of spot vessels remains limited, given the strong forward charter activity throughout the year, and any subleased vessel may have limited flexibility to meet urgent delivery needs.

We anticipate an increase in LNG production in the coming weeks due to the resumption of operations at Equatorial Guinea LNG and a partial resumption of production at Atlantic LNG, Peru LNG and Nigeria LNG, in addition to the volume service at Sabine Pass Train 6 and Calcasieu Pass, which should help alleviate some pressure on the supply side during the winter peak.

However, given the precarious state of the market, any delay or advance can have a significant impact on prices.

Overall, while the market seems to breathe a sigh of relief, the healthier picture on the supply side is offset by the onset of colder weather in North Asia and Europe and congestion growing ships at the Panama Canal, and we are certainly not running out of hot water yet. .

The statements, opinions and data contained in the material published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and editor (s) of Natural Gas World.


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