Market eyes liquefaction plant disruptions in US and Australia

European TTF front-month price outlook: Neutral

Kpler Insight anticipates the TTF front-month contract to remain relatively steady this week as higher temperatures are forecast to spread across the continent after 1 December, while the possibility of strong, albeit volatile wind output will weigh on gas for power demand. This is likely to be countered by concerns around lower feedgas deliveries into the US’ Freeport LNG facility.

Asian LNG front-month price outlook: Neutral

Kpler Insight has a neutral outlook on the Asian LNG front-month price over the next week, maintaining an open arbitrage to Asia. While temperatures are forecast to be relatively in-line with seasonal norms, the emergence of some buying interest and unplanned outages in Australia and the US are expected to keep the market supported.

US Henry Hub front-month price outlook: Neutral

US Henry Hub prices held steady last week after the last week of the December contract saw prices rise to the $3.50/MMBtu mark briefly. Upcoming cold weather across much of the US will likely keep Henry Hub prices above $3.00/MMBtu as residential and commercial demand is slated to increase considerably.

Daily natural gas and LNG prices ($/MMBtu)

Source: ICE, NYMEX, Spark Commodities. Brent-indexed price represents 12% slope of 90-day moving average of Brent front-month contract. Netforward calculation is 115% Henry Hub front-month contract plus spot fixture shipping and regasification costs into Gate (Spark Commodities).

US front-month arbitrage to Asia - Cape of Good Hope vs Panama Canal

Source: Spark Commodities, incorporating ICE-listed Spark Freight and Spark Cargo products. For a full M+12 forward curve and netback cost breakdown, contact Spark at info@sparkcommodities.com.

Price movement definitions

Neutral – front-month prices move in a 20 cents/MMBtu upside/downside range

Bearish – front-month prices decrease by more than 20 cents/MMBtu

Bullish – front-month prices increase by more than 20 cents/MMBtu

Europe: Uncertainty around Freeport outage mitigates higher temperatures in Europe

The European TTF front-month price settled at $14.43/MMBtu on 27 November, marking a slight 0.4% w/w decline, equivalent to $0.05/MMBtu. This decrease was primarily attributed to a temporary rise in temperatures across the continent and higher wind output, notably peaking at 117 GWh on 24 November, which curtailed gas demand for power generation. Pipeline flows from Norway to France have rebounded as the narrowing TTF-NBP spread facilitated flow recovery, supported by the reinstatement of the UK-France power link. Meanwhile, Russian gas flows into Slovakia remained stable, despite last week’s market shock following Gazprom Export’s decision to cease deliveries to OMV under their long-term agreement. EU-27 LNG imports also fell week-on-week to 1.31 mt from 1.63 mt the week prior, contributing to a decline in EU gas storage levels to 87% as of 27 November. Lastly, the addition of Gazprombank to the US sanctions list on 21 November fuelled concerns among market participants about potential disruptions to Russian flows via TurkStream. However, emerging possibilities of exemptions or alternative payment arrangements may mitigate these risks and sustain continuity.

Looking ahead, Kpler Insight expects TTF prices to remain relatively stable next week, largely driven by higher temperatures forecasted after 1 December. However, upside risks remain, tied to lower feedgas deliveries into the US’ Freeport LNG facility, volatile wind output projected by Kpler Power in the coming days and developments surrounding planned works at Norway’s Dvalin and Visund fields.

Norwegian pipeline gas flows into France (GWh)

Source: ENTSOG. Exact data range is 01/11/24-26/11/24

Asia: Arbitrage to Asia set to remain open, with prices supported by unplanned outages

Asian LNG front-month prices increased by $0.36/MMBtu w/w to $15.02/MMBtu on 27 November. Asia’s premium to the European TTF front-month contract rose to $0.59/MMBtu on 27 November – up from $0.17/MMBtu a week prior and pushing Asia to become the premium market for US uncommitted cargoes transiting the Panama Canal. However, for vessels transiting via the Cape of Good Hope, Europe remains the premium market (see arbitrage chart above).

An unplanned outage at Australia’s 4.9 mtpa Pluto liquefaction plant, potential issues at the US’ Freeport facility and colder temperatures arriving in northeast Asia supported prices over the past week, with northern and eastern areas of China witnessing a drop in temperatures of 6-10°C between 23-27 November, according to the China Meteorological Administration (CMA). In Japan, temperatures also dropped, raising power demand by 8% w/w last week and driving gas for power demand higher. As such, METI data shows that LNG stocks held by major power utilities fell to 2.06 mt on 24 November, down from 2.28 mt in the week prior. Meanwhile, a 6.2-magnitude earthquake that struck central Japan on Tuesday had no impact on nuclear power plant operations.

For this coming week, Kpler Insight anticipates prices in Asia to hold in a steady range, with risk weighted to the downside amid expectations that European TTF prices will fall this week. While temperatures are expected to be in line with seasonal norms over the coming week, uncertainty surrounding LNG supply at Pluto and Freeport is expected to keep prices supported.  Over 30 November-6 December, there is a 50% chance of above-normal temperatures in Japan, while South Korea is expected to also see a 50% chance of normal temperatures across 9-15 December, according to local meteorological agencies.

US: Henry Hub prices decrease as December contract rolls over to January

After a volatile week of trading, US Henry Hub front-month price settled at $3.22/MMBtu on 27 November, effectively the same price as 20 November. Through the week Henry Hub prices peaked at $3.43/MMBtu on colder near-term forecasts before decreasing by $0.21/MMBtu on 27 November as the January contract took hold.

Power demand remained relatively flat week-over-week, averaging 32.2 Bcf/d, while residential and commercial demand grew by 5.60 Bcf/d over the last seven days to 31.8 Bcf/d as a cold front began to pass through the mid-West. LNG feed gas demand fluctuated throughout the week as operational issues at Freeport LNG saw deliveries swinging from as high as 1.90 Bcf/d to as low as 1.3 Bcf/d on a daily basis. Flows have remained near the 1.4 Bcf/d mark since 24 November. Total LNG feed gas demand averaged 13.4 Bcf/d over the last week, down from 13.6 Bcf/d. Supply grew to nearly 103 Bcf/d over the last week, due to a partial relaxation of curtailments from natural gas producers and the completion of pipeline maintenance work that was impacting offtake from the Permian Basin. The US also saw a second consecutive, albeit small, withdrawal from storage, with a 2 Bcf gas pull.

Heating demand is likely to increase considerably over the next week, with temperatures across much of the eastern half of the US dropped near or below freezing. Space heating requirements are expected to exceed 40 Bcf/d for several days next week as frigid temperatures take hold. To meet this surge in demand, producers are expected to step up output alongside a sizable withdrawal from storage, firmly marking the end of the injection season.

US residential and commercial week-ahead demand forecast

Source: EIA, Kpler Insights

LNG supply: Pluto and Freeport outages under scrutiny; Brunei LNG resumes exports

Australia’s 4.9 mtpa Pluto LNG, operated by Woodside Energy, experienced a shutdown on 25 November due to a fault in the plant’s control system. While preparations for a safe restart began on 28 November, the facility has not yet resumed operations, leaving vessels awaiting loading. The 159,800m³ Woodside Goode, which entered the berth on 25 November, was unable to load and is now waiting near the installation. One additional vessel, the Woodside Donaldson (expected 29 November) is signaling calls at the terminal.

Pluto has shipped five cargoes totaling 0.41 mt in November so far, in line with its historical monthly average of six cargoes.

Ichthys LNG project is seeing its first recovery to near-normal export levels since the outage began earlier this year. This week may mark the first with three loadings, as two vessels have already loaded, and the 170,000m³ Apostolos is signaling a loading at the terminal on 30 November. The 8.9 mtpa facility is stabilizing operations as heat exchanger inspections conclude, supporting a gradual return to full production.

Brunei LNG resumed production after resolving power supply issues, with liquefaction trains now stabilized. The Arkat LNG, which began loading on 25 November, will be the plant’s first shipment post-recovery, signaling a return to normal activity. The plant’s 7.2 mtpa capacity ensures strong term commitments remain intact.

Bintulu LNG in Malaysia continues to face operational challenges, potentially delaying shipments planned for January to March 2025. Deliveries may now be pushed back to April or later, further tightening spot market availability.

Freeport LNG in the U.S. saw Train 2 operations halted on 22 November, with a restart anticipated by 2 December. Additionally, pipeline flows into the facility experienced three minor disruptions on 22, 24 and 25 November, with deliveries dropping to 1.29 Bcf on 24 November, the lowest level observed. Despite these interruptions no significant impact on export volumes has been observed.

Daily feedgas flows to US’ Freeport (bcf/d)

Source: Kpler Insight

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