Magic Of Round Numbers: European Gas Reaches €20, €30, €40 And Now Hits €50

When a commodity reaches another round price level, the number of news stories on that particular product increases tremendously. Last week, this happened with European carbon allowances and natural gas, which took turns in hitting €60/CO2e and €50/MWh respectively. But while the former were practically standing still between May and August, the latter was developing in the last four months as if it got on a high-speed train.

Amid tight supply of both pipeline flows and LNG, the pace of gas price growth has only accelerated during the summer. It took just 22 trading days for the TTF Front-Month contract to rise from €40/MWh to €50/MWh in late August, in comparison with 27 days when going from €30/MWh to €40/MWh and almost 50 days for covering the distance between €20/MWh and €30/MWh.

All the three round levels have been exceeded over the summer period, which once again demonstrates the special importance of this year’s Q2 and Q3 for shaping pricing environment for many months to come. With the UGSs still lacking volumes, players are increasingly concerned about the market balance they will see shortly. If at the beginning of summer 2021 low storage inventories were partly mitigated by expectations of further increase in supply to Europe, it seems there is not much hope for a happy ending as winter approaches.

September’s gas market promises nothing less than a new wave of challenges, given that Norwegian output is restricted to planned maintenance, LNG prices in Asia continue to rise while the Atlantic hurricane season poses risks for cargo loadings at the US Gulf. Is the sky the only limit for European gas prices in the current situation?

The opinions expressed in this blog are mine only and do not reflect the views of my employer

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Amid 2021 Tight Gas Market, Norway Has Not Come To Rescue So Far

From cold waves extending well into May across NWE and CEE and much lower wind generation in Germany to stronger LNG demand among Asian buyers and reduced pipeline exports from Russia – all the key factors have come together. Norway, which might have provided a partial relief to gas supplies into the region, also has not made much progress in offering more volumes within the region this year.

On average, aggregated Norwegian gas flows recorded a slight decline between January and early August 2021 in comparison with the same period in previous years, excluding 2020. That said, gas prices were standing at exceptionally high levels throughout most of this year.

Norway has been unable to take advantage of favourable market conditions mainly because of the heavy maintenance carried out in Q2. As a result of forced adjustments to outage schedules for the country’s fields and terminals made last year due to the pandemic, 2021 planned works were particularly extensive.

However, even following the seasonal maintenance, flows had held steady at above 300 mcm/d only for a month before the unplanned outage at the Troll field started in late July, resulting in a 15pc drop in gas supplies from the NCS.

Troll outage was concluded on 5 August, and one would think that Norway is now given the ideal opportunity to maximise exports. Indeed, Norwegian flows have exceeded 300 mcm/d early this month, but there is some nuance to the situation (what a surprise in 2021). During the next two months, Norway’s potential for maintaining current production levels is likely to be limited as the second piece of yearly maintenance has just begun.

This time, much less Norwegian gas production will be affected by the planned outages than in the previous quarter. In the present circumstances, however, the loss of even 38 mcm/d between August and September can have a tangible impact on NWE market.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

Global Gas Market Lives Its Own Olympic Year

The Summer of 2021 has already largely overshadowed the whole of 2020, a truly exceptional year for the energy sector.

Take, for instance, the European part of the global gas market that is so much talked about. Europe’s main issue, which is low gas storage levels, has not only retained its relevance but has even become more acute since early April. As of 30 July 2021, NWE facilities were just 52.5pc full for the first time since at least 2011, with the current backwardation being a serious impediment to significantly speeding up injections into the regional UGSs.

In that context, LNG should have come to the rescue, but it was not to be. Amid a severe heatwave that gripped parts of Asia and Middle East, buyers from Japan, South Korea, as well as many other regional importers, has attracted a great number of spot cargoes this summer. As a result, European LNG send-out dropped by about 40pc between 1 April and 30 July, while the volumes re-exported last month from the region’s ports in an eastward direction rose to a six-year high, surpassing the level of early 2021. Asia´s total LNG imports in July nearly touched 24.5 Mt, a 10pc increase as compared to June, with deliveries from outside the region matching the record set in January 2021.

US gas market has also not been immune to rapidly evolving developments. Between April and July, the average monthly loadings from the country´s LNG plants exceeded 6 Mt, a figure comparable to the levels recorded in the first quarter that historically sees the highest exports during the year. On top of that, domestic gas consumption, supported by hotter temperatures, in recent months was generally above the average for the same period from 2013 to 2020, which together with strong export demand resulted in US storages falling below historical norms.

This paved the way for gas price rally across the regions, thus making it one of the most widely discussed issues among other commodities. And it seems like the gas market should remain an important newsmaker in the energy area much longer than the Tokyo Olympics will be the primary focus for sports media 🙂

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Less Windy & Not More Sunny: Where 2021 European Gas Prices Get Additional Support From

Given their importance, these two factors have become sorts of Leo Messi and Cristiano Ronaldo for the regional market, pushing other ‘players’ into the background. However, gas contracts have also been supported by this year’s limited electricity generation from key RES.

Amid unfavourable weather conditions, a few countries with a high share of RES in the power supply mix have considerably decreased wind output this year, as compared to 2020. This is particularly the case for Germany, which is the biggest wind energy producer in Europe. The daily average volume of electricity generated by German wind installations dropped by about 20pc in the first seven months of 2021 from the corresponding period in 2020. This far outweighs a 6pc rise for Italy, while wind turbine electricity output in Austria, the largest CEE supplier of power from that source, has declined by 7pc this year.

When summer arrived everywhere in Europe, the situation with renewable energy production should have improved somewhat by higher solar generation, but it did not happen. The total amount of electricity produced from solar energy in Germany, Italy and Austria combined between 1 January and 25 July 2021 was almost identical to that of 2020. By the way, this year’s solar output could even have decreased quite substantially if Europe had not been hit by heatwaves during the last two months.

So far, lower wind power generation, without being offset by solar output, fits perfectly within a larger ‘perfect storm’ picture of 2021 European gas market.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

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How German Gas Market Reacts to July Pipeline Outages

The three-day shutdown of Yamal route was almost imperceptible for that country’s market. Meanwhile, the planned interruption of supply via Nord Stream, which is going through much longer and more extensive maintenance, has already made adjustments not only in the current situation but also have had an impact on preparations for the winter season.

With Nord Stream being stopped for about two weeks starting 13 July, Gaspool prompt contracts rose to be at a premium to the TTF early last week. Given the minimum cost of gas transportation to the neighbouring country, the Netherlands immediately reacted to the changing balance in the German market. Before the maintenance started, H-gas had been generally imported to the Dutch area from Germany, but in recent days flows flipped to net exports.

Apart from the Netherlands, German volumes has become less available for other buyers. Since mid-July, the Czech Republic, also being one of the busiest export destinations for Germany, has sent more gas to Gaspool than it has been imported from that area.

This year’s Nord Stream works have been spiced up with the European low gas stocks. Injection rates into the German UGSs have significantly declined amid the maintenance, with CEE storages being affected as well. Between 13 and 17 July, only 14 mcm was injected into the Austrian, Slovakian and Czech facilities combined.

According to the calendar of maintenance works impacting pipeline deliveries to Europe via different routes during the remainder of summer 2021, the unavailability of Nord Stream should be the last major obstacle for the refilling NWE gas storages. But plans and reality may be two different things. Over the last two years, which has made players more prepared for surprises of all kinds, that truth has become more relevant than ever.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

European LNG Re-Exports Back on the Agenda

Asia has not only made western buyers almost unable to come close to competing for spot LNG but has strengthened its ability to draw additional cargoes from Europe.

Abnormally high temperatures Eastern and South Asia experienced between May and July have prompted regional importers to turn on ‘a vacuum cleaner’ for soaking up as many seaborne volumes as possible. That vacuum cleaner has been actually supplied with power by higher Asian LNG spot prices, spiking to multi-year seasonal highs in recent times.

CME JKM Front-Month Future spread to Ice Endex TTF Month-Ahead was, on average, €4.5/MWh from 1 June to 2 July, an increase of about 50pc since April and 115pc compared with March. That difference in prices contributed to maximization of deliveries eastwards directly from LNG plants, and at the same time resulted in more cargoes being re-exported to Asia from European ports.

May’s re-exports fell so close to those of January 2021, when a total of approximately 400kt had been delivered along that route amid skyrocketing LNG prices in the Asian market. In June, players were also actively resorting to Europe’s receiving facilities for further supplies to China, India, Bangladesh, etc. If the Dutch Gate LNG terminal had not been stopped for planned maintenance since mid-June, traders may have even hit this year’s monthly record set in early 2021.

Re-exporting activities in the coming months will depend on how long spot LNG continues to be in strong demand among Asian buyers, given that the prices hold steady above $10/MMBtu. Should warm weather continue across Asia, it is quite possible that an extended period of high demand for cooling can immediately be followed by massive purchases of LNG in autumn to secure enough supply for winter conditions.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

While Gas Contracts Surge Across the Board in Europe, Front-year Lags Behind

Each of the four diagrams shows the evolution of gas prices over the last months, with contracts at key European hubs hitting their multi-year highs one after another. But while it may seem as if prices move synchronously, there is no uniformity across the curve.

Prompt and near-curve contracts have predictably posted the biggest gains in the second quarter. The combination of several factors, about which so much had already been said, resulted in Europe not having enough volumes both to meet the current demand and to ensure healthy injections into the storages. This month, TTF Day-Ahead settled above the level it had been assessed at in January and Q4 ’21 product rose to be at a premium against Q1 ’22.

Contracts further out on the curve followed products for delivery in 2021-early 2022, but the Dutch front-year price was rising at only about half that rate. Fundamentally, the far curve ‘weakness’ stems from the lack of factors that have supported this year’s monthly and quarterly contracts. Low levels of gas in storage, for now, have a small impact on year-ahead values, while weather conditions for the following year are unknown and 2022 LNG flow patterns is not easy to predict. Thus, one of the few solid things the front-year contract can rely on now is bullish carbon.

And most importantly, increasing pressure on the far curve is coming from expectations that additional gas volumes should enter the regional market next year as new supply routes are being launched and existing ones expanded. The progress made in constructing Nord Stream 2, full capacity expected on TAP as well as further extension of the TurkStream pipeline are all taken into account when assessing contracts for delivery in 2022 and beyond.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

Europe’s Lng Imports Between a Rock of Asia and a Hard Place of Latin America

In comparison with January 2021, the Dutch prompt contract rose by more than €3/MWh, while in the last month and a half the growth was about €6/MWh. Impressive, isn’t it? 🙂

In any other case, the answer could possibly be positive but in the current market environment even the price of €30/MWh is not high enough to ensure a steady inflow of LNG to Europe.

In the latter part of June, LNG send-out from the European terminals declined to 1.66 TWh/d, its lowest point for the last four months, as suppliers preferred to direct a large part of cargoes eastwards. Asian buyers were increasing their trading activities on weather-driven demand during the second quarter, which in turn resulted in a wider JKM/TTF spread. Production issues reported at a number of US and Asia-Pacific export facilities gave rise to additional buying interest among regional importers. If India had not experienced the Covid-19 outbreak of such scale, there could have been even less LNG available for Europe.

On top of that, Europe has come up against another barrier when competing for LNG cargoes. Amid severe drought that hit Brazil, which meets around three quarters of its electricity demand with hydropower, this month’s US LNG imports to the Latin American country are expected to nearly match the record high of December 2020.

Over the last two years, European players have become accustomed to ‘perfect storm’ conditions that regularly arise in the gas market. Feels like the market has been exposed to another one again.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

 

TTF Gets Stronger Against Other European Hubs on Restricted Injections Into Dutch Storages

This factor can already be named MVP (Most Valued Parameter) of 2021, referring to the impact that low levels of gas in the UGSs have on the pricing environment. In that context, the TTF hub has been especially supported in recent weeks as compared to other market areas.

NWE is particularly affected by the slow pace of injections into the underground facilities during this summer season. In early June, the storages in that region were just 31.6pc full versus 38.5pc for Central Europe. And the Netherlands was ranked last among all continental NWE countries with the Dutch UGS fullness standing at 21.7pc as of 4 June.

The Netherlands recorded an aggregated net gas injection of only 550 mcm in the last five weeks, although LNG send-out from the Gate terminal was at the near-maximum level for almost the whole of May. A large part of available volumes was essential for meeting weather-related demand, but when temperatures finally exceeded the seasonal norm in early June, thus creating conditions for higher injections into the storages, the send-out into the country’s transmission grid started to decrease. With regard to future LNG supplies, higher Asian premium resulting from stronger summer demand cannot but instill NWE players with a sort of pessimism.

In addition to that, Q2 Norwegian outages, which by the way have not reached their peak yet, further restricted injection potential of the Dutch market, contributing to higher TTF both on the near and far end of curve against other trading points.

In the months ahead, TTF spread to different areas, particularly on winter delivery contracts, will depend largely on the ability of Dutch market participants to enjoy access to additional volumes of gas and to have the necessary flexibility when selecting between supply sources. The fewer options players have, the stronger TTF is.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

Europe’s Gas Storage Stocks Continue to Face Challenges on Road to Recovery

In May, the plot has taken another turn as the operations at several LNG terminals were suspended adversely impacting Europe’s import capacity, at a time when injections into the storages are lagging far behind the average pace. Following the shutdown of Montoir installation since early May and the planned maintenance on Dragon LNG that started in mid-May, Adriatic LNG halted send-out last week.

Both French and Italian terminals should resume operations in early June while the UK’s installation is expected to get back to work by the middle of next month. But it seems unlikely that European LNG imports will significantly improve, as the three terminals are coming back online at an unfavorable time in terms of competition with Asian importers that recently become much more active.

In addition to stronger seasonal demand for air-conditioning, buyers in East Asia still have fresh memories of this past winter which will provide support for restocking consumption in Q2 and Q3. Given the ongoing Norwegian maintenance succeeded by the outages on Yamal and Nord Stream pipelines in July, Europe can hardly relax in the coming months.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

 

Best Couple Of 2021: Gas And Carbon Go Hand In Hand With One Another

In the first three days of the past trading week, TTF Year-Ahead dipped by about 12pc, just as the benchmark December 2021 EUA dropped over the same period. Gas contracts recorded sharp losses between 17 and 19 May despite the fundamentals remaining bullish (tighter summer supply in NWE, low storage levels, unseasonably cold weather), which again shows carbon’s influence on the wider energy complex.

Both EUA and gas were moving in parallel in the later half of the week as well, the difference being that the prices rebounded from Wednesday lows.

This week’s developments are fully in line with the process of increasing carbon-gas correlation, with extra dynamism coming from speculative players who flooded the emissions market over the past year. In that context, it has become critical to closely monitor how EUAs react to the stock market movements, which in turn affects the gas curve.

Correlation between the two commodities works equally the other way round. Due to its impact on EUA demand, gas often sets the tone for the emissions market, especially at times when carbon lacks reference points of its own. It is this two-way relationship that is the key for understanding the synchronization between carbon and gas markets.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

 

Fill Up The Tank, Please: Europe Still Lacks Robust Injection Season

European gas market is in a unique situation this summer, viewed from a storage perspective. Q2 is already well underway but the regional facilities are on average 33pc full in mid-May, an increase of less than 4pp over the last month and a half. That is the lowest rate of growth from 1 April to 14 May since at least 2011, when the corresponding data became publicly available.

In many countries, the UGSs have started to go into stable injection mode during the past two weeks but the filling rates still remain low. For instance, the aggregated filling level of German sites went up by only 0.12pp a day during the first half of May while the daily rate for the same period of 2020 exceeded 0.20pp and was close to 0.50pp two years ago.

With limited supply in the regional market, players are actually losing valuable time accorded for restocking gas inventories, depleted by a record volume this past winter. More than six weeks have passed since the start of gas summer but, due to colder April temperatures and limited Russian supplies accompanied by Norwegian outages and May’s lower LNG sendout, Europe’s storages added 4 bcm in total. From 2018 to 2020, the build in inventories averaged 13 bcm over the same period.

The storage issue is naturally built into prices. Just have a look at the development of the spread between Winter 21-22 and Winter 22-23, which increased fourfold since Jan, reaching €5.3/MWh on 14 May. Bearing in mind that the works on the Norwegian fields should ramp up and competition for LNG cargoes with Asian buyers is strengthening, it is highly likely that this level is not the limit.

The opinions expressed in this blog are mine only and do not reflect the views of my employer.

For a look at all of today’s economic events, check out our economic calendar.

Carbon Rally to Push Coal Further Out Of Europe’s Energy Mix

Carbon price rally is just gaining momentum, and given the EU’s ambitious emission reduction targets, it is only a matter of time before EUAs reach another psychological level. In that context, the room for manoeuvre for Western European coal power plants is extremely limited.

One can hardly overestimate the importance of rising carbon allowances, as demonstrated by the fact that spark spreads in the region have remained much higher than dark ones during the last years. Between 1 April and 7 May 2021, the indicative front-month baseload spread for a medium-efficiency NWE gas-fired plant was €0.7/MWh while that for a 40pc coal unit stood at minus €5.5/MWh. Yet TTF Month-Ahead prices grew up by more than 25pc as compared to a 14pc increase in ARA coal prices over that period.

Coal still plays a significant role in Western Europe’s energy mix, most notably in Germany, as a great part of lignite and hard coal production was hedged in previous years with carbon prices ranging from €5 to €25/tCO2. Meanwhile, each new record set for EUA price recalls that the future of coal predetermined, just as it was practically inevitable that Pep Guardiola’s team would return to the UEFA Champions League final 🙂 But if it took the Catalan boss ten years to reach that stage, coal may become a thing of the past more quickly in Western Europe.

The opinions expressed in this blog are mine only and do not reflect the views of my employer.

KRK Terminal’s Receipts is a Microcosm of 2021 LNG Market

The Croatian FSRU became operational at the very beginning of this year, when suppliers actually lost interest in westward deliveries because LNG prices in the Asian region touched the skies amid unusually cold weather and shortage of vessels. There was only one cargo imported to the Krk terminal between January and February, a few weeks before the chaos in Asia began. Remarkably, the preliminary schedule for this year, published in Q3 2020, had foreseen the arrivals of five tankers in the first two months of 2021.

As the JKM-TTF spread had tightened, more and more cargoes made their way to Europe, as can be seen from the imports to Croatia starting from late Q1. In March and April, the country’s FSRU handled four carriers, half of which were loaded in the US that reacts to the market changes in the most timely manner among LNG producers. Another one was re-exported from the port of Zeebrugge, in sharp contrast to early 2021 when most cargoes redirected from Northwest Europe ended up in Asia.

Krk terminal is certainly not the only one in Europe which serves as an indicator of LNG market movements. However, if it may take quite a while to analyse larger installations, looking through Croatian imports can save you a lot of time. That is useful, isn’t it?

The opinions expressed in this blog are mine only and do not reflect the views of my employer

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Time Machine: TTF Returns to January Levels

This year, TTF Day-Ahead traded over the course of April have been, on average, more expensive than it was three months before, even with a sharp decrease on Friday, 23 April. As the causes of this month’s rise in European gas contracts – abnormally cold temperatures, delays in injections into the storages, Norwegian outages, record-high carbon prices, etc. – were being analysed multiple times, it may be interesting to look at the current developments from a different angle, by comparing with those a year ago.

Apr 2021 is the very opposite of Apr 2020 for the regional gas market, except perhaps in the area of LNG imports. This is largely due to the easing of Covid restrictions across Europe, but another thing is important in that context.

The significant difference in market environments, external backgrounds as well as expectations among players, now and then, yet again unsettles many of our assumptions about the speed at which a once static commodity has been recently evolved. Not so long ago, the conditions could not have changed so drastically over the period of 12 months, but in today’s reality even months can make a huge difference. With European decarbonization plans taking shape and competition between pipeline and LNG intensifying, high volatility will likely be more common in the gas market.

The opinions expressed in this blog are mine only and do not reflect the views of my employer

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Right Here, Right Now: Norwegian Outages Start Building Up

If Q2 2021 European gas market can be accompanied by a soundtrack, it will definitely be ‘Right Here, Right Now’ by Fatboy Slim. The name of that song accurately describes the dynamism of things taking place since the very beginning of this year’s gas summer.

Following the reversal in injections into the gas storages, Europe is already experiencing lower production from the NCS. Norwegian maintenance, that has started during the second ten days of April, represents the first significant decline in gas supplies to NWE since January, when players lost access to LNG amid soaring Asian premium and vessel shortages.

Over a period of two and a half months, the regional market is expected to be short 4.9 bcm of supplies from Norway, most of which fell between April and May. Q2 daily gas exports from the country are expected to be constrained by 18% on average as compared to the levels seen in late March.

2021 Norwegian outages are developing according to their usual timing, in contrast to last year. In 2020, the works on the fields and processing plants were postponed until Q3 due to Covid restrictions, thereby extending a series of outages initiated by the planned shutdowns of Nord Stream and Yamal pipelines. It assisted in clearing a part of oversupply, laying a foundation for the subsequent growth in prices.

What influence Norwegian maintenance will have on the market environment this time? This is not a simple question, given the need for filling up storages on the one hand and favourable conditions for Europe-bound LNG deliveries on the other. As of now, the most that can be said is that the longer UGSs do not go into injection mode, the stronger will be the effect of Norway’s lower supplies throughout this quarter.

The opinions expressed in this blog are mine only and do not reflect the views of my employer.

For a look at all of today’s economic events, check out our economic calendar.

Cold Weather Once Again Managed to Make Its Presence Felt

It looks as if this year’s weather is paying off the debts accumulated during the winters of 2019 and 2020 when the European gas market lost a sizeable portion of heating demand.

Although the winter has already passed, it is still early to disregard the temperature factor. This can be seen clearly in the Champions League quarter-final between Bayern and PSG that was played on 7 April amid heavy snowfall and below-freezing temperatures.

Another cold snap in Europe has resulted in higher prompt gas prices earlier in the week. Notwithstanding the losses made in the 7-9 April trading sessions, the average weekly TTF Day-Ahead rose by 5.5pc as compared to the previous week.

As the weather was getting colder, heating demand in NWE and CEE jumped by more than 40pc since late March, forcing players to interrupt net injections into the storages. Approximately 850 mcm was withdrawn from the regional facilities over the period from 6 to 9 April. The figure could have been even higher if the weather had been less windy at that time.

There is nothing unusual about the weather having a significant influence on the gas market environment during the shoulder period. But it is exactly the weather that acts as a ‘black swan’ event this year, having made waves in Asia and the US in January-February and continuing to make its presence felt in Europe for the fourth month in a row.

The opinions expressed in this blog are mine only and do not reflect the views of my employer.

For a look at all of today’s economic events, check out our economic calendar.

 

 

European Gas Market Welcomes Easter on The Rise

Gas volumes were being withdrawn from the storages over 130 consecutive days and, as soon as Day-Ahead dropped to a discount to Front-Month, net injections into the regional facilities resumed on 26 March.

This year, players began stockpiling nine days earlier than in 2020. As a result of an earlier start of injection season, gas prices saw strong growth in late Mar – early Apr. Prompt contracts have gained about 5pc this week alone, reaching the highest level since the beginning of Feb. Now, remember where the market stood a year ago, with coronavirus spreading across the continent, storages being more than 50pc full, and with Day-Ahead being assessed at €7/MWh or so.

The development of spread between Q2 and Q3 ’21 over the course of Mar provides another clear illustration of the attention players pay to the storage factor. If the former contract was trading at discount to the latter in the first half of Mar, then in the final days of winter Q2 flipped to a premium against Q3. This is despite the expectations that LNG imports to Europe will stay high in Apr-May.

The opinions expressed in this blog are mine only and do not reflect the views of my employer
For a look at all of today’s economic events, check out our economic calendar.

The Coming Gas Summer Must be Fundamentally Different from the One of 2020.

Europe’s storages are less than 30pc full in late Mar, for the first time in three years. Excluding 2019 and 2020, which stand apart with extremely high gas inventories, the regional UGSs became on average 86pc full at the end of 2014-18 summer periods.

To reach that level, it would be necessary to inject about 60 bcm between Apr and Sept 2021. In comparison, the facilities were fed with 45 bcm during the six-month period of 2020.

Stronger injection demand offers more opportunities for LNG players that have been focused on westward loadings in the last two months. European LNG imports should reach a new record high in March and unlikely to run out of steam in the near term.

It would obviously be too simplistic to assume that prices in Europe will depend solely on these two factors during the summer, bearing in mind May-June maintenance works in Norway, shares of wind, solar and hydropower in electricity generation, gas vs. coal competition, etc. Nonetheless, it is LNG import dynamics and injection demand that will define the general market sentiment in the coming period.

The coming gas summer must be fundamentally different from the one of 2020.

As a result of cold winter weather, Europe’s storages are less than 30pc full in late Mar, for the first time in three years. Excluding 2019 and 2020, which stand apart with extremely high gas inventories, the regional UGSs became on average 86pc full at the end of 2014-18 summer periods. To reach that level, it would be necessary to inject about 60 bcm into the regional facilities between Apr and Sept 2021. In comparison, the storages were fed with 45 bcm during the six-month period of 2020.

Much stronger injection demand offers additional opportunities for LNG players that have been focused on westward loadings in the last two months amid tighter spreads between JKM and TTF. It appears that European LNG imports should reach a new record high in March and unlikely to run out of steam in the near term amid the current market conditionы.

It would obviously be too simplistic to assume that prices in Europe will depend solely on these two factors during the summer, bearing in mind May-June maintenance works in Norway, shares of wind, solar and hydropower in electricity generation, competition between gas and coal, etc. Nonetheless, it is LNG import dynamics and injection demand that will define the general market sentiment in the coming period. Which one do you think will lead the game?

The opinions expressed in this blog are mine only and do not reflect the views of my employer

Need Another Proof that LNG is the Most Dynamic Part of the Global NatGas Market?

There were few cargoes delivered to NWE in early Jan, but already in mid-Mar the imports to UK, NL, BE and France’s Dunkirk set a new weekly record. With the tightening in JKM-TTF spread and higher withdrawal rates amid lack of growth in pipeline flows into the region, favourable conditions were created for LNG.

NWE had become so attractive for traders, that tankers started to move northwards even from Med facilities. Algerian and Egyptian cargoes can rarely be found in NWE, but this week has seen the arrival of three 70kt carriers in Rotterdam, Zeebrugge and Dunkirk. Never before had players delivered so much LNG to those terminals from North Africa.

In the coming months, there will likely be a sufficient number of cargoes offered in NWE, which appears similar to that of 2020. However, on the demand side the market differs considerably from where it stood a year ago, given the need to replenish the depleted UGSs.

The opinions expressed in this blog are mine only and do not reflect the views of my employer