• In the context of soft demand across major markets, non-major supply disruptions like Hurricane Beryl are unlikely to pose a noticeable impact on gas prices.

• Summer weather in the northern hemisphere is the top factor to watch out for in the coming weeks.

• If prolonged heatwaves happen in major countries, it may break the well-balanced market.

The main factor that was being closely watched by the gas market in recent days was Hurricane Beryl in the Caribbean and Gulf of Mexico, which had the potential to cause interruptions to US liquefied natural gas (LNG) production.

As the risk associated with the hurricane eased and operations of US liquefaction facilities remained largely unaffected, gas prices at major trading hubs all fell.
The Title Transfer Facility (TTF) price dropped 7% from €33.685 per megawatt-hour (MWh) on 2 July to €31.335 per MWh on 9 July, while the Asia spot LNG price fell 1.6% from $12.56 per million British thermal units (MMBtu) to $12.365 per MMBtu over the same timeframe.

This also factors in the general softened anticipation for Asian gas demand amid heatwaves in North Asia that has yet to translate to materialized buying from the region’s importers.
Healthy supplies and ample inventories at major markets are also placing downsides on gas prices.
US: Increased domestic supply despite hurricane concern receding

Front-month Henry Hub prices fell 3.7% week-on-week from $2.435 per MMBtu to $2.344 per MMBtu on 9 July, the lowest level in the past two weeks, mainly due to increased supply, while power has been holding relatively steady compared to last summer.

US Lower 48 daily dry gas production was still around 100 billion cubic feet per day (Bcfd) in June.

US gas storage remains at robust levels, up 32 billion cubic feet (Bcf) week on week to 3,134 Bcf for the week ending 28 June.

Our balances indicate healthy storage levels this winter, which will keep our Henry Hub forecast lower.

The major concern of the week over the impact of Hurricane Beryl on US LNG production has receded.

The hurricane strengthened to Category 1 before landing along the US Gulf Coast but was downgraded and weakened throughout 8 July.

US liquefaction plants and LNG production were largely unaffected, with only Freeport LNG cutting production over the weekend.

Feedgas flows to Freeport LNG almost vanished to only 8.7 million cubic feet per day on 7 July from nearly 2 Bcfd on 6 July.

With lower production, the plant’s utilization on a 30-day moving average fell from 100% on 6 July to 98% on 7 July.

Freeport LNG intended resume operations after the storm had passed, according to an announcement.

Europe: downsides from healthy supplies

Europe’s abundant gas stockpiles and healthy gas supplies have confined the region’s price benchmark TTF to below $11 per MMBtu in recent weeks.

Europe’s gas storage was 78.7% full on 7 July, up from 77.1% a week earlier, to a similarly high level as the same period of last year.

Norwegian pipe flows were slightly lower at 333.8 million cubic meters per day (MMcmd) on 9 July from 334.6 MMcmd a week earlier, but this is 25% higher than the same period last year.

Steady pipe flows from Norway also weighed on Europe’s LNG demand, which has stayed below last year’s level in the year to date.

Summer weather is a key factor to monitor in July and August, which could result in spiking gas demand from the power sector.

Temperatures in the next two weeks in some European countries such as Germany will be higher than normal.

For now, however, LNG flows to Europe remain muted. More gas power capacity additions are expected in Germany, with the country planning more investments in the sector.

Some 5 gigawatts of gas power capacities, which are expected to convert to run on hydrogen, will be auctioned by early next year, according to Germany’s Economy Ministry.

North Asia heatwaves on the radar

Price upsides have emerged in North Asia, where summer appears to be hotter than normal.

Tokyo’s temperature on 9 July reached above 30 degrees Celsius (°C) compared the 22-year normal of 23.1°C , according to Rystad Energy.

This is lifting the city’s power demand and putting pressure on the power grid. Day-ahead electricity prices in the Tokyo region rose to the highest level this year. Similarly, southern China has started to experience higher temperatures after heavy rains and flooding in recent weeks.

Temperatures in Guangdong province have risen above 28°C, about 2°C higher than the 22-year normal.

Weather forecasts indicate heatwaves in Japan and China are likely to last until mid-July.

Nevertheless, high summer temperatures have yet to translate into actual LNG buying and have not been able to lend firm support on Asia spot LNG prices, although some utilities in Japan consider purchasing LNG cargoes for delivery in August and onward.

Japan’s LNG inventory stood at 4.89 million tonnes (Mt) in June, compared to 5.06 Mt in May and 5.47 Mt in last June.

If heatwaves persist, inventory could be drained further with firm gas-for-power demand.

China’s LNG import arbitrage window is still open, but as it has shrunk from nearly $2 per MMBtu in June to about $0.9 per MMBtu in coastal regions on 9 July (if considering a two-month trading lag) and due to soft industrial consumptions, procurement by Chinese importers has been limited.

China’s manufacturing Purchasing Managers’ Index (PMI) is still weak, with only March and April witnessing the index in expansion.

In South Asia, monsoon rains are causing cooler weather in India, limiting demand from the power sector.

This has also lifted hydropower output, which has shown strong price competitiveness compared to gas power.

Even so, India continues to purchase cargoes following heatwaves in prior months.

Indian Oil Corporation purchased a cargo for late July or early August delivery, while GAIL is seeking four cargoes for September-October delivery.