Global natural gas prices were mixed on Monday, picking up where they left off last week, but the outlook remains strong as bull market fundamentals in Europe, Asia and South America remain largely unchanged.
The first month’s domestic balancing point and securities transfer mechanism contracts in Europe traded sideways last week, but remained stable around $ 9 / MMBtu. Rising temperatures on the continent have reduced demand and an increase in pipeline imports weighed on spot prices, according to Engie EnergyScan.
Meanwhile, a drop in European carbon prices on Friday did not drive the short-term curve and futures prices rose on Monday due to maintenance outages at supply fields and regasification terminals in Norway, in the UK and France. Only three cargoes of liquefied natural gas (LNG) are expected to be unloaded at UK, Dutch and Belgian ports in the coming days, Schneider Electric said in a note Monday.
“Slightly more comfortable fundamentals pulled European net storage injections above last year’s levels late last week,” analysts at Engie EnergyScan said on Monday. “However, in absolute terms, inventory levels remain relatively low and remain a source of concern. And they could continue to support prices this week. “
European stocks were at 39.5% of capacity on Saturday, the last day for which data is available. This compares to the five-year average of 54%.
Demand in Asia also remains stable, another upward factor for European prices as the two regions compete for natural gas supply in the LNG market. Spot prices in North Asia were again valued at $ 11 on Monday for delivery in early July, while Japan-Korea-Marker futures also rose last week.
Buyers in the region continue to stock up before the hot weather. Temperatures over the next two weeks in Japan and South Korea – two of the world’s largest importers of LNG – are expected to be above normal, according to Maxar’s weather office.
South Korea said late last week it would stockpile additional gas to better maintain supplies to protect against price increases or supply disruptions like those seen last winter. The country’s Ministry of Commerce, Industry and Energy said the country will store nine days of gas against a previous target of seven in a measure expected to be finalized next month.
On the other side of the world, one of the worst droughts in decades created a water crisis in Brazil that left hydropower reservoirs nearly depleted. The dry weather has created additional demand for LNG in the country, according to Bloomberg, which reported last week that the country has received a record number of cargoes from the United States this year.
NGI’s calculations show that prices delivered off-ship to the Pecem terminal in northeastern Brazil stood at $ 9.49 / MMBtu at the end of last week.
In the United States, feed gas deliveries have hovered between approximately 10 and 11 Bcf / d in recent weeks, with maintenance reducing terminal uptime. U.S. natural gas prices rose last week, although moderate weather in much of the country limited demand. Heat out West led the gains, sending NGI’s Weekly Spot Gas National Avg. up to 11.5 cents at $ 2,800 / MMBtu. Natural gas futures also ended the week comfortably above $ 3.00, but lost two cents on Monday to close at $ 3.07 amid a cooler outlook.
Oil rose last week to new highs. The outlook for demand continues to strengthen as parts of the world recover from the pandemic. The Organization of the Petroleum Exporting Countries and its allies are also maintaining plans to gradually increase production until next month. While Brent futures for August delivery fell 40 cents from Friday’s close, they were still closed at $ 71.49 / bbl. NGI’s calculations showed that the maximum Brent-linked LNG prices were above $ 12 / MMBtu on Monday.
In other developments last week, Russian President Vladimir Putin said the laying of the first section of the Nord Stream 2 gas pipeline is complete. The submarine section of the twin 5.3 Bcf / d system, which would transport natural gas from Russia to Germany, has yet to be connected to the section on German soil. But Putin reportedly said in a speech at the St. Petersburg International Economic Forum that Gazprom PJSC would soon be ready to begin filling the pipeline.
NS2 supplies could help ease the storage crisis in Europe and put downward pressure on prices.
Elsewhere in Russia, Sakhalin Energy Investment Co. Ltd. said the Sakhalin LNG terminal loaded its 2,000th shipment late last month from the plant on Sakhalin Island in the Pacific Ocean north of Japan. The plant started operations in 2009 and was Russia’s first LNG export terminal.
In other supply news, Tanzania’s Energy Minister Medard Kalemani reportedly told lawmakers last week that the country could start construction of a 7.5 million LNG export terminal. tonnes in 2023. Equinor ASA is developing the project with the Tanzanian government.
The company depreciated the project earlier this year, saying it doesn’t compete with others in its portfolio. Medard said discussions have resumed with Equinor and other companies involved in the project to move forward. There are currently 103.9 million tonnes of liquefaction capacity on offer in Africa, which could become a key LNG export region if the projects materialize, the International Gas Union said in a report released last week.