Natural gas and LNG weekly: Maintenance works to weigh on gas supply amid conflict escalation in the Middle East

Executive summary

European TTF front-month price outlook: Steady

Kpler Insight expects the front-month TTF to remain steady in the following week. After falling briefly after the (incorrect) announcement of an Azeri-Ukrainian gas transit deal, the price picked up as tensions continued mounting in Southern Lebanon. This will continue to support the bulls, with fundamentals, while remaining loose, seem to be tightening, mainly due to lower expected US LNG exports as feedgas flows fell and ongoing maintenance works in Algeria and Norway.

Asian LNG front-month price outlook: Steady

Asian LNG prices declined by $0.13/MMBtu w/w to $13.10/MMBtu on 25 September due to weak fundamentals as supply recovered mainly from Bintulu into the region. LNG prices in Asia are expected to stay stable for the week-ahead, driven by continued geopolitical uncertainty and supply outages from US and Ichthys balancing weak fundamentals in the region.

US Henry Hub front-month price outlook: Steady

Prices are expected to remain steady in the coming week as the last few days of the October contract saw prices rising by $0.29/MMBtu week-over-week. Disruptions to supply from Hurricane Helene and unplanned maintenance on the NGPL pipeline south of the TexOK hub alongside slight increases in LNG feed gas and power demand created conditions to push prices up over the last week. However, once the storm passes and power demand falls off in earnest as Autumn begins, prices are not expected to increase much further as the November contract begins.  

Daily thermal fuel rolling front-month prices ($/MMBtu)

Source: Kpler calculations based on ICE and NYMEX

Price movement definitions

Steady – 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

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Europe: Fundamentals start tightening as geopolitics continues to keep the market on edge

The European TTF front-month price increased by $0.75/MMBtu over the past week, or 6.6%, to close at $12.24/MMBtu on 25 September. Prices entered a steep decline after the announcement of a potential transit deal between Azerbaijan and Ukraine that would allow piped gas from the former to transit to Europe via the latter. However, this turned out to be incorrect, and the market rallied soon after as tensions escalated between Israel and Hezbollah and following an unplanned maintenance event in Norway. Despite this, fundamentals remained relatively loose at the EU level.

Looking ahead at price-softening factors, on the pipeline side, heavy maintenance in Norway is still expected to finish on 03 October. In Algeria, flows to Italy via Transmed were slowly increasing and reached approximately 75% of pre-maintenance levels (compared to 55% last week). Similarly, despite scheduled maintenance at Medgaz expected to end on 27 September, Algerian flows to Spain were at 70% of usual flows. Part of this was reflected in Algerian LNG flows, which have already surpassed August levels and are expected to reach 1.2 mt for September – a 10-month high. We have also seen gas storage injections into French storage resume, after net withdrawals were observed last week for the first time since April, thus showing limiting French appetite for natural gas in the coming days. EU underground inventory levels remained high at almost 94% according to GIE data, while LNG arrivals dropped only slightly w/w ending at 1.35 mt. On the power side, renewable availability is expected to be above-average in the region and French nuclear output to remain strong.

Algerian pipeline (bcm) and LNG (Mt) exports:

Source: Kpler, ENTSOG

However, stronger bullish factors are expected for next week, as for the first time since Hurricane Francine feedgas flows into the US fell below the 12 bcfd mark, reaching 11.8 bcfd on 25 September. Indeed, a minor drop was noted at Calcasieu Pass and there were no flows to Cove Point due to maintenance taking place there. There is also a force majeure expected at a compressor station for Sabine Pass, reducing gas flows to the terminal by approximately 200 mmscf/d (end date unconfirmed). This has been reflected in forecasted US LNG exports for this week, expected to reach 1.5 mt (-19% w/w). Lastly, there was an unexpected outage at the Karsto processing plant in Norway which will reduce flows by 50 mcm/d until the 27 September. In addition, cooler temperatures are expected over all of western Europe and are expected to fall under seasonal norms by the weekend, potentially pushing up slightly gas demand for heating.  

The geopolitics factor remains strongly in play as the tensions continued to mount between Israel and Hezbollah, with an increasing amount of missile strikes in the area. The UN and the US are pressing for an immediate de-escalation, however the situation continues to fuel bullish sentiment in the market.

Asia: Geopolitical premium expected to weigh on weak fundamentals

Asian LNG front-month prices decreased by $0.13/MMBtu to $13.10/MMBtu on 25 September w/w. This was driven by weak fundamentals in Asia as supply recovered from Bintulu and temperatures in Northeast Asia moderated last week.

For the week ahead, Kpler Insight expects Asian LNG prices will remain stable as geopolitical uncertainty  around Russian gas supply to Europe as well as lower supply from US and Ichthys will be balanced with weak Asian spot demand. Fundamentally, we view weak spot demand in Asia to continue into early October until Asian buyers start to begin winter procurement and restocking.

In Japan, although average temperatures have dropped to below 30 degrees this week for most of the country, last week saw high summer temperatures above 30 degrees extending the need for summer cooling and call for gas fired generation. Major power suppliers had to resort to delaying maintenance at its thermal power plants to meet higher demand for cooling.  As a result, inventory levels held by major power companies dropped for the second week in a row from 1.87 mt to 1.64 mt according to METI data on 22 Sept, putting inventory levels below historic averages and same level as end of September last year.  We view Japanese buyers can still meet demand with term contracts and will remain inactive in spot market until focus switches to winter restocking which we view could begin in October once the prolonged summer is over.  

We continue to view South and Southeast Asian buyers to remain sidelined at current prices above $13/MMBtu, although some players such as PTT will continue to procure cargoes to meet baseload demand to meet power demand. We note that while there are some pockets of spot demand materializing as Philippines closed a tender and Bangladesh imported its first cargo at Summit FSRU for the first time since May but we view they do not translate to added bullishness to impact Asian prices.

Japan LNG stocks held by major power companies (mt)

Source: METI

US: Supply disruptions push Henry Hub prices upward

US Henry Hub front-month prices increased by $0.29/MMBtu last week from $2.30/MMBtu on 18 September to $2.59/MMBtu on 25 September. The large increase in the October contract over the last week is attributed to a variety of factors. Supply has been disrupted this week due to Hurricane Helene and unplanned maintenance on the NGPL pipeline in East Texas. Demand saw a small uptick week-over-week as power sector demand grew slightly, despite LNG feedgas being on the decline. Additionally, storage injections for the week ending 20 September are expected to be well below historical averages. These factors, alongside the fact that the October contract expires at the end of this week, have pushed Henry Hub prices upward.  

Henry Hub front-month Price ($/MMBtu)

Source: CME

Power demand grew slightly week-over-week as warmer temperatures in the south provided a small uptick in cooling demand. Average power burns over the last seven days rose to 41.5 Bcf/d, up from the previous week’s average of 40.4 Bcf/d. Mild weather is expected to prevail for the remainder of September and into October. Additionally, Hurricane Helene is expected to make landfall at the Florida panhandle on 26 September, as a possible Category 4 storm. This will likely cause a substantial drop in demand in the southeastern US for several days due to power outages and the closure of industrial facilities.    

After precautionary shut-ins, LNG feed gas demand bounced back last week after Hurricane Francine passed through the Gulf Coast. Deliveries dropped to 11.2 Bcf/d on 13 September and recovered to 12.77 Bcf/d on 15 September. However, feed gas receipts then began to steadily decrease after the 15th, dropping to 11.8 Bcf/d on 25 September. This decrease was a result of disrupted feed gas deliveries into Corpus Christi LNG, annual maintenance at Cove Point LNG and a slight decline of feed gas into Calcasieu Pass LNG. At Corpus Christi, feed gas demand dropped from 2.11 Bcf/d on 14 September to 1.55 Bcf/d by 19 September. Flows into the facility resumed on 20 September. Maintenance at Cove Point typically takes three weeks to complete, with operator Berkshire Hathaway planning to bring the facility back into service on 10 October. Until then, roughly 700 MMcf/d of feed gas demand will be out of the market. At Calcasieu Pass, LNG feed gas deliveries have decreased by 360 MMcf/d since 19 September. These volumes equate to the feed gas demand of four of the 0.626 mtpa mid-scale liquefaction trains that comprise the facility. As a result, the outage may be due to maintenance activities. Overall US LNG feed gas demand will likely remain relatively flat at just below the 12 Bcf/d mark for the coming week.  

Dry natural gas supply decreased slightly week-over-week, continuing to hover near the 100 Bcf/d mark. With Hurricane Helene travelling through the Gulf of Mexico, many offshore fields are being shut-in or having production curtailed until the storm passes. Already more than 500 MMcf/d of production has been taken offline, with more outages expected. While the storm is not expected to directly pass over the main production areas in the Gulf, operators are still evacuating their platforms as a precaution. Forecasts indicate that the storm’s path will avoid major onshore production areas. Additionally, unplanned maintenance on the NGPL pipeline south of the TexOK hub affected production early this week, with the major pipeline only operating at 65% capacity since 23 September. NGPL is a key pipeline that brings natural gas to the Gulf Coast from the Haynesville shale, Anadarko Basin and the Appalachia Basin. Kinder Morgan has not provided an indication of when the pipeline may return to full operation.  

Disruptions to LNG feed gas demand from Hurricane Francine and low power demand led to a storage build of 58 Bcf for the week ending 13 September, in line with Kpler’s estimate of 60 Bcf. Kpler Insights expects a similar build of 57 Bcf for the week ending 20 September. This is a substantial decrease from late September 2023, where injections were near the 90 Bcf mark. The lower estimate is due to recovering LNG feed gas, a slight uptick in power demand, and relatively flat production.

LNG supply: US feedgas slumps as Cove Point shuts for annual maintenance; Ichthys repairs ongoing

Feedgas to US liquefaction facilities has slumped by 8% or 1 bcf/d over the past ten days to 11.8 bcf on 25 September, driven mainly by the start of annual maintenance at the one-train 5.25 mtpa Cove Point facility on 20 September. Annual maintenance at the plant typically takes place from late September for a duration of 3-4 weeks, leading to the loss of 0.4-0.5 mt (4-5 LNG cargoes) to the market. As discussed in the US section, maintenance is also suspected at four of 18 of the 0.626 mtpa mid-scale trains at the 10 mtpa Calcasieu Pass facility. Hurricane Helene is currently expected to make landfall as category 4 with winds of up to 115 knots, however it is currently not expected to pass near US liquefaction facilities so Kpler Insight currently does not anticipate major disruptions to LNG availability.  

US feedgas by liquefaction plant (bcf/d)

Sources: Berkshire Hathaway, Kinder Morgan, Cheniere, Williams, Sempra, Boardwalk, Venture Global

In Australia, offtakers at Inpex’s 8.9 mtpa Ichthys terminal told Kpler that the second train, which has been offline for repairs since 20 August, may restart exports until mid-October. The facility is still completing repairs to the second train following issues with its heat exchanger, while train one has also faced reduced production in recent weeks.

Kpler continues to monitor the start-up of new liquefaction facilities coming online this year. Mexico’s first LNG export facility at Altamira is currently loading its first full cargo on board the Energos Princess following a first partial loading in early August. The 1.4 mtpa Altamira Fast LNG faced several delays to its commissioning due to factors including a pipe fracture of the plant’s cold box in May. Kpler Insight expects the US’ 13.3 mtpa Plaquemines phase one and Senegal/Mauritania’s 2.4 mtpa Greater Tortue Ahmeyim GTA FLNG to be the next facilities to produce first cargoes. The British Sponsor is expected to be holding a commissioning cargo for GTA but has yet to dock after arriving offshore on 10 September.  

Kpler continues to monitor dark loadings from the first 6.6 mtpa train at Russia’s sanctioned Arctic LNG 2 facility. This week, the Mulan loaded the facility’s sixth cargo and is headed west, possibly towards the Saam FSU. If the vessel unloads at the FSU, we believe it could be close to full capacity. Meanwhile, the Asya Energy has passed the Northern Sea Route and could be headed for the Koryak FSU at Kamchatka following the unloading of the Everest Energy there last week. Meanwhile, the Pioneer has transited the Suez Canal in a south-bound direction on 25 September. Kpler is confirming whether the vessel is storing LNG onboard and at time of publication, the late August STS between Pioneer and New Energy north of Suez Canal is unverified.

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