Gas storage levels in Europe are at the top end of the five-year range, putting the region it in a healthy position going into the second half of the year.
Gas prices on the Netherlands-based Title Transfer Facility (TTF) have fluctuated in recent weeks in response to planned maintenance on the Norwegian Continental Shelf (NCS) and geopolitical tensions in Russia. As of 4 July, the TTF price was down to $10.84 per million British thermal units (MMBtu) reflecting market expectations that annual maintenance in Norway will end as planning, high output from renewable power generation and healthy storage inventories.
In Asia, spot LNG prices have generally followed the TTF, rising marginally to $12.08/MMBtu on 4 July. In the US, the Henry Hub price settled up at $2.71/ MMBtu on 4 July due to robust production figures at the start of the week. If US gas production remains elevated, higher than expected injections are likely next week.

Europe

Europe is continuing to inject gas into storage, with inventory levels well above 2021 and 2022 levels for this time of the year.
Storage facilities are currently 77.6% full at roughly 88 billion cubic meters (Bcm), well positioned to reach the 90% target before November.
The withdrawal rate is currently around 12 million cubic meters per day (MMcmd) at an injection rate of 399 MMcmd.
At a country level, UK storage is 49% full, with France at 65% and Germany at 81%.

This week Europe is predicted to see above-average temperatures, providing an upside risk to prices and increased demand from cooling.
Industrial sector demand has been muted in recent months.

Taking Germany as an example, production in the chemical and petrochemical activity has only slightly resumed.

From January to May this year, natural gas consumption in Germany’s industrial sector was down roughly 10% compared to 2022 levels.

That is supported by the latest Manufacturing Purchasing Managers' Index (PMI) which shows that Europe remained weak for the first half of the year.

The latest PMI numbers for Germany were 40.60, the weakest in three years, indicating that industrial activity is continuing to decline.

On the gas supply side, Norwegian flows are steady and have ramped up slightly, adding some bearish signals.
Exit nominations from the NCS totaled 251 MMcmd on 4 July, despite ongoing unplanned outages and maintenance work.
Currently, Troll is expected to extend maintenance to 6 July, with maintenance at Norne and Kollsnes ending on 5 July.
The 78 MMcmd affected capacity at the Nyhamna plant will last until 15 July due to technical issues.
Russian flows into Europe totaled 84.44 MMcmd on 1 July, of which 44.54 MMcmd came through Ukraine and 39.90 MMcmd through the TurkStream pipeline.
Russian flows have remained stable since TurkStream restarted following maintenance. However, geopolitical instability in Russia still risks impacting Russian pipeline gas flows.

Last week (week 26), gross LNG imports into Europe totaled 1.60 million tonnes (Mt) with major buyers including Spain, France, and Netherlands.
Figure 1 shows that the European continent has imported 2 Mt more LNG in the first half of 2023 than this time last year, driven by higher LNG demand and increased regasification capacity in northwestern Europe.

Asia
Asia spot LNG prices continue to track the TTF’s movements, rising slightly to $12.08/MMBtu as of 4 July.
On the demand side, Northeast Asian imports are expected to remain mostly muted due to comfortable storage inventories.

In Japan, gas-for-power storage levels remain above the two-year average, with South Korea’s storage levels also healthy.

However, there is an upside risk due to current short-term temperature forecasts across the region.
China, South Korea and Japan are all expected to experience above-average temperatures for the rest of this week.
As shown in Figure 1, growth in European LNG demand has largely been offset by a decline in Japan during 1H 2023, representing a 5 Mt decline year-on-year.

Southeast Asia and China have been driving year-on-year growth in LNG imports in Asia. Southeast Asia have increased LNG imports by 2.5 Mt compared to 1H 2022.

In China, overall LNG imports have risen by just 0.5 Mt year-on-year due to slow demand recovery. However, in June, the trend somewhat reversed with China importing 1.6 Mt more in June last year.

US
Lower 48 inventories for the week ending 28 June saw 77 billion cubic feet (Bcf) injected into storage, as indicated by last week’s US Energy Information Administration (EIA) report.
Working natural gas stocks totaled 2,805 Bcf, which is 15% higher than the five-year average and 25% more than this time last year.
On the supply side, dry gas production remains inelastic at 101 Bcf per day. We were anticipating production declines in the Haynesville but this has not yet materialized.

Total year-on-year supply during 1H 2023 is expected to grow by 3.1 Bcf. US feedgas production has climbed back to 13.2 Bcf per day as Sabine Pass returns from maintenance, supporting regional balances as supply continues to grow. Deliveries to US LNG export terminals were up by 5.1% last week.

Henry Hub prices continue to stay at the low end of the range, settling at $2.71/MMBtu on July 4 due to robust production figures at the start of the week.

If production stays elevated, we can expect to see larger-than-expected injections for the week ending 7 July.

On the domestic demand side, there is some material upside due to warmer temperatures forecast for the next two weeks.

In recent weeks, low prices have kept gas-for-power demand elevated.