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Global gas markets are painting distinctly different pictures this week as supply uncertainty in Asia supports prices, but European markets are starting to see downside potential on the horizon.
Mild weather in Europe and frigid forecasts for the US will drive price behavior in the coming days.
Milder temperature forecasts in Europe are ushering in an overdue bearish sentiment and helping to calm prices, relatively speaking.
Higher flows from Norway and nominations from Russia by long-term buyers are also contributing to downward pressure, partially offsetting concerns around low storage which now stands at 38% of capacity, and continuing tensions between Russia and Ukraine.
Robust LNG imports have instilled some confidence in supply availability as a record 10.2 million tonnes were imported into Europe in January, of which nearly 46% came from the US.
Efforts are ongoing to secure further emergency supply in case an escalated Russia-Ukraine standoff results in disruption of pipeline supplies.
The Snohvit LNG facility, which has been offline since September 2020 following a turbine fire, has delayed its much-awaited restart by about seven weeks to mid-May 2022, suggesting a loss to the market of at least 9 cargoes, badly needed at a time when Europe would have been hoping to rebuild gas inventories from near zero.
In the US, large draws from storage in recent weeks driven by colder-than-average weather have contributed to some short-term bullish sentiment, with the Front-Month Henry Hub now trading at near $4.8/Mmbtu, after briefly crossing the $5/Mmbtu threshold.
The near-term downside may be limited though and the market expects material volatility ahead of an expected deep freeze in Texas in the coming days.
LNG feedgas supply has also surged to over 100 MCFD to the under-commissioning Calcasieu Pass facility, which is expected to join the Sabine Pass Train and become fully operational by the first quarter of the year. Both facilities are forecast to supply around 12 million tonnes of LNG across 2022 combined.
Most Asian buyers began the year with healthy inventories, but with mounting LNG outages coinciding with low temperatures continuing into February, it was only a matter of time before their inventory took some damage and they were pushed back into the spot market. Consequently, Asian LNG prices have trended back towards near-$30/Mmbtu, aided by continuing volatility on the TTF.
Outages are slowly hacking away at expected supply for the coming months.
The unplanned maintenance at Gorgon is not yet completed and the announcement of extended production issues at Bintulu may add to spot requirements in April, resulting in some upward pressure on the forward curve. This is in addition to the extended outage at Snohvit, which may likely have a larger impact on European supplies.
However, further upside risk may be limited in the near term due to the Lunar New year holidays, which may mean some buyers are able to delay purchases until late in the month.
