Here is Rystad Energy’s gas and LNG market update from senior analyst Lu Ming Pang

Gas prices on the Netherlands-based Title Transfer Facility (TTF) returned to $11.92 per million British thermal units (MMBtu) on 20 June, despite falling to $10/MMBtu on 19 June. It follows a rally in recent weeks which saw prices reach $14.10/MMBtu due to Norwegian pipeline maintenance being unexpectedly extended.

The Asian spot LNG price for August increased to $11.20/MMBtu at market close on 20 June, dipping from the $12.59/MMBtu seen in our last report on 15 June, likely tracking recent developments on the TTF the day before. Recent changes in the TTF price will again likely affect the Asian spot LNG price with some lag, as Europe continues to be set the price with the higher premiums it is willing to pay. In the US, the Henry Hub price increased to $2.63/MMBtu on 20 June, avoiding the fluctuations seen in TTF and Asia spot prices. The weather is a key factor to watch, with warmer-than-normal temperatures expected to span Europe, Asia, and the US in the coming weeks, which may increase gas demand for power to be diverted to cooling.

Europe

The TTF prices appear to be in a state of flux as it continues to re-balance itself after a spate of supply shocks associated with Norwegian pipeline gas.

Some uncertainty in renewables generation in Europe has also added some market volatility this week, with prices TTF prices closing at $11.92/MMBtu on 20 June, despite fluctuating between $12.10 and $13.02/MMBtu in the latter half of the day. Over the past week, TTF prices have been volatile, falling to $10/MMBtu early on 19 June.

Europe’s gas storage levels are currently at 832.20 terawatt-hours (TWh) or 74.89 billion cubic meters (Bcm) and were 73.86% full as of 18 June. These levels are high compared to a year ago when European storage was 53.84% full as of 17 June 2022 at 592.93 TWh or 53.36 Bcm. With Europe aiming to have 90% of its storage facilities full by 1 November, the region looks as if it will comfortably reach the target based on historical consumption and demand destruction due to high gas prices compared to last year.

Norwegian gas flows were at 256.32 million cubic meters per day (MMcmd) on 19 June, lower than the 275 MMcmd observed on 14 June, but higher than the 237 MMcmd seen on 6 June. Maintenance at the Nyhamna gas processing plant and at feed gas fields Orman Lange and Aasta Hansteen will now continue until 15 July with no further changes announced yet, affecting 78 MMcmd of capacity. The unexpected three-week extension in maintenance until 15 July is the main driver behind higher TTF prices in recent weeks.

Maintenance is ongoing at other locations, such as the Oseberg field from 19-27 June, affecting around 22.5 MMcmd of capacity.

The Troll field’s maintenance which started on 19 June should end by 4 July, returning 21.5 MMcmd of affected capacity back into the market. The return of these affected flows should help alleviate lower flows of late. Although future maintenance work is planned, the risk is much reduced, resulting in more predictable supply. Russian flows totaled 84.15 MMcmd on 17 June, of which 45.2 MMcmd can via Ukraine and 38.93 MMcmd through the Turkstream pipeline which concluded maintenance on 12 June. The combined flow on 17 June is higher than combined Russian flows of 55.8 MMcmd following Turkstream’s maintenance on 12 June. LNG send-outs in Europe totaled 518 MMcmd on 18 June, close to the 529 MMcmd reported on 13 June.

As reported last week, fundamentals show that pipeline and LNG supply remains strong despite slight hiccups in Norwegian production and flows, as illustrated by above-average storage build-ups. Barring further supply shocks, or a sudden increase in demand, TTF prices should be less volatile once maintenance on Norwegian pipelines ends. The weather is still forecast to remain above normal across much of Northwest Europe through the first week of July.

Asia
Asia spot LNG prices continue to lag the TTF by around 24 hours, with Asia spot LNG prices averaging $11.20/MMBtu on 20 June.
With activity in the Asian gas market relatively uneventful, price volatility is the result of the marker tracking the TTF.
Despite Asia spot prices being in the low $10/MMBtu, they are still attracting pockets of demand in South Asia, especially in regions experiencing warmer-than-usual weather, which will require more gas power to support cooling.

Japan’s weather bureau has predicted a 60% or more chance of above-normal temperatures across most of the main islands of Honshu and Hokkaido through mid-July.
South Korea has a 40% chance of seeing above-normal temperatures for the last week of June, followed by some respite in the first week of July with a 50% chance of normal temperatures.
However, this will revert to a 40% chance of above-normal temperatures for the second and third weeks of July.

Major Japanese power utilities have reported storage levels at a combined 2.3 million tonnes as of 11 June, some 18% above the five-year average and 7% above the same period in 2022.
Higher-than-normal inventories across much of Northeast Asia will help these countries cope with rising temperatures.
As a result, many utilities are waiting to see what further actions they will need to take before optimizing cargoes.
There has been some optimization between Northeast Asian countries, with cargoes diverted from one to another in anticipation of reduced demand in one area.

Asia’s fundamentals remain the same with high storage levels in Northeast Asia generally denting demand from large importers.
An eye should be kept on the impact of warmer weather ahead, as its severity may play a part in influencing these buyers to return to the market to restock inventories later in the summer.

US
Henry Hub prices increased to $2.54/MMBtu on 20 June, up from $2.41/MMBtu on 15 June.
The fundamentals remain the same, with high storage levels continuing to suppress prices, especially amidst a period of lower gas demand following maintenance at liquefaction plants.
Storage levels are now at 2,634 billion cubic feet (Bcf) as of 9 June, some 15% higher than the five-year average and 27% higher than the same period last year.
Injections into storage reached 84 Bcf on 9 June, some 7% higher than the five-year average and 11% lower than the 94 Bcf seen this time last year.

The US Central and South Atlantic regions are indicating higher cooling degree days (CDDs) than the Middle Atlantic and Pacific regions which are tracking closer to baseline temperatures.
As a whole, the US is still indicating about 35 CDDs, implying that temperatures are not much above the baseline, meaning we are still awaiting a pick-up in gas power demand for cooling.
This is set to change in July when temperatures are expected to be warmer than average, which may cause gas power demand for cooling to increase.
However, strong storage levels so far this year could result on only modest changes to prices.

Feedgas to US liquefaction plants totaled 10.5 billion cubic feet per day (Bcfd) on 18 June, due to maintenance at Sabine Pass LNG which received total feedgas of 2.8 Bcfd on 18 June, compared to average feedgas of about 4.6 Bcfd in May.