Global gas crunch zigzags as no end to volatility in sight
European gas storage levels are beginning to recover; however, it is predicted that geopolitical tensions within the region may continue to create price volatility.
An inundation between December and month-to-date in January of more than 10 million tonnes of LNG across Europe has assisted in calming TTF prices down to around US$26 million British thermal units.
“This influx has overshadowed concerns surrounding the reverse flow from Germany to Poland on the Yamal-Europe pipeline for what is now the third week in a row,” said Rystad senior gas market analyst Emily McClain.
Withdrawals from the storage have slowed considerably and now sit at only 2.8% week-on week, the continued increase in wind generation in Germany and the UK may lead to a further easing in gas prices as the market new requires less gas-fired generation.
Bloomberg analyst, Abhishek Rohatgi recently wrote that LNG deliveries to Europe are likely to climb this month, mainly due to the higher netbacks compared to Asia and their current warmer than usual weather.
In December, LNG imports to Northwest Europe and Italy reached 4 million metric tons, which was 5% above BNEF’s forecast published in early December.
Rohatgi did however highlight that increased LNG deliveries are unlikely to resolve the visible tightness within the European market due to the lower-than-expected Russian imports.
“Weather trends in North Asia will play a key role in determining how much LNG Europe can get, as colder temperatures would see more spot cargoes needed in North Asia,” he wrote.
The research firm predicts the Asian markets will remain tepid due to the normal and above-normal temperature forecasts and LNG inventories being full.
“Pollution control measures may also reduce industrial gas demand during the Beijing Winter Olympics, which run from February 4-20,” Rohatgi wrote.