Uncertainty around the future of Russian gas pipeline deliveries to Austria fuels the TTF

Executive Summary

European TTF front-month price outlook: Bullish ▲

Kpler Insight anticipates the TTF front-month contract will increase in the coming week due to high uncertainty around the continuation of Russian gas deliveries to Austria after OMV’s announcement yesterday. Regarding fundamentals, lower-than-average temperatures are forecast towards the end of next week, and strong wind output in NW Europe is expected to balance out the region’s gas needs for power and heating purposes.  

Asian LNG front-month price outlook: Steady

Kpler Insight projects Asian front-month prices to remain stable for the coming week. We view, although some colder weather is expected in Northeast Asia, healthy inventory levels from recent mild temperatures and robust spot supply into the region will keep prices balanced again for the week ahead.

US Henry Hub front-month price outlook: Steady

Henry Hub prices increased by more than $0.20/MMBtu over the week, even managing to break the $3.00/MMBtu mark for a brief time. Front-month prices rallied on producer discipline and offshore production outages keeping supply under 100 Bcf/d and the addition of more heating degree days to the winter forecast.

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

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

Europe: Uncertainty around Gazprom’s deliveries to Austria to drive TTF gains

The European TTF front-month price rallied by $0.94/MMBtu, or 7.4% w/w, to close at $13.60/MMBtu on 13 November, after reaching the highest levels observed since December 2023 on Tuesday. Tight fundamentals were likely behind most of the increase. Extremely low wind output, particularly in Germany, coincided with temperature declines, resulting in high gas consumption for power and heating purposes. This led to significant net withdrawals from underground gas facilities across the continent, reducing stock levels from 94.4% to 92.6% between 6-12 November. Despite higher gas needs, EU LNG imports came in at only 1.33 mt for the week commencing the 4 November, the lowest level since September. This suggests that, given the current price trends, some market players in NW Europe are opting for storage withdrawals rather than sourcing additional LNG.

Beyond fundamentals, the market has likely been pricing in increasing risks stemming from Russia’s counter-offensive in the Kursk region, home to the Sudzha interconnection point through which Russian gas molecules enter the Ukrainian territory to reach Europe. Adding to the volatility, prices lost around 2% in the morning of 13 November with the news that Slovakia’s SPP concluded a short-term pilot contract with Azerbaijan’s SOCAR. However, the TTF quickly regained the lost ground, likely as market players concluded this would not be related to the extension of the transit agreement between Ukraine and Russia. Lastly, OMV’s announcement stating that the International Chamber of Commerce had awarded the company damages over Gazprom’s irregular supplies to Germany yesterday also sent bullish signals to the market, as it could lead to the halt of Russian gas flows to Austria should OMV withhold payments to Gazprom as a way to recover past losses.  

Kpler Insight expects prices to increase next week as the market continues to assess the impact of OMV’s announcement on pipeline gas supply into the EU. In terms of fundamentals, we anticipate that stronger, albeit volatile wind output in NW Europe will offset some of the increasing need for gas for heating purposes, particularly between 18-22 November. Regarding LNG imports, some diversions towards the EU could take place in the coming days if the TTF continues to trade at a premium to JKM.  Pipeline imports should remain at high levels, with limited planned works happening at the Troll and Njord fields in Norway, taking offline 5.1 smcm/d from the former between 14-15 November and 3.8 smcm/d from the latter between 15-20 November. Another upside risk factor to watch out for, is lower Norwegian flows into France, likely at the expense of higher flows into the UK; higher wind output and increasing temperatures in the following weeks should translate into stronger deliveries towards Dunkirk.

Daily EU underground gas storage change (bcm)

Source: GIE, Kpler Insight

Asia: Colder temperatures in the coming week not expected to stimulate spot demand

Asian LNG front-month prices remained largely stable, edging up by $0.06/MMBtu w/w to $13.56/MMBtu as of 13 November. This stability reflects weak fundamentals, with robust supply and reduced demand driven by unseasonably warm weather. Prices held steady partly due to a rise in European TTF prices.

Kpler Insight expects Asian LNG front-month prices to remain stable in the coming week. Although colder temperatures are forecasted for Northeast Asia, these are expected to remain brief. Some spot demand may arise as winter progresses, but ample spot supply should keep prices balanced for the week ahead.

In Northeast Asia, procuring spot cargoes has been minimal in November, as warmer-than-usual weather has helped build inventories with term cargoes - we anticipate this trend to continue next week. While China and South Korea may see brief cold snaps, the duration is unlikely to prompt significant spot demand. Current prices above $13/MMBtu remain relatively high, and major Asian buyers are likely to adopt a wait-and-see approach.

In Japan, the Japan Meteorological Agency (JMA) forecasts warmer-than-average temperatures to extend into December, and we expect this will continue building up stock levels. METI data shows major power companies’ LNG inventories increased from 2.1 mt to 2.2 mt w/w as of 10 November. Tohoku Electric restarted its 825 MW Onagawa No.2 nuclear reactor on 13 November after a short technical outage. Given the brief nature of the outage and warmer temperatures, the impact on LNG demand is expected to be limited. Additionally, Japan’s nuclear availability is set to increase in December as Chugoku Electric prepares to restart its 820 MW Shimane No.2 reactor by 7 December, also offline since the 2011 Fukushima incident.

In South and Southeast Asia, most buyers are likely to remain on the sidelines due to current prices above $13/MMBtu. However, some pockets of demand persist, as demonstrated by PetroVietnam Gas awarding a partial cargo for delivery between December and January.

Beijing, Seoul, Tokyo mid-term temperature forecast (°C)

Source: CMA, KMA, JMA ; as of 14 November

US: Henry Hub rallies on weak production and the expecting of cooler weather

The US Henry Hub front-month price increased by $0.23/MMBtu to $2.98/MMBtu on 13 November. This nearly 10% increase in prices was primarily a result of an upcoming spate of colder weather across much of the US alongside lower natural gas production.

Outside of a slight disruption at Corpus Christi, US LNG feed gas volumes largely recovered from the outages that heavily impacted the sector in the previous week.  After dropping to a low of 10.6 Bcf/d on 3 November, feed gas volumes increased rapidly above 13 Bcf/d, averaging 13.4 Bcf/d for the week. Feed gas demand will likely begin to steadily increase over the next few weeks as cooler weather allows for LNG plants to operate above nameplate capacity.

Power demand remained flat over the last seven days, averaging 34.4 Bcf/d, up by 0.1 Bcf/d w/w. Warmer temperatures across the southern half of the US have kept power burn high for this time of year, while residential and commercial demand continue to lag. While some regions did see some colder weather in the last last week, namely the northeast, res-com demand has still yet to fully come online. Though, recent forecasts have added up to 10 heating degree days on average this winter, indicating a possibly slightly chillier winter than the last two years.

Natural gas production spent much of last week under the 100 Bcf/d mark, with Hurricane Rafael causing a shut-in of nearly 1 Bcf/d of offshore production in the Gulf of Mexico. Natural gas production was also down last week as natural gas producers voluntarily cut production in an effort to bolster prices.

Underground storages climbed further above the five-year average for the week ending 1 November, ending the week at 3,932 Bcf. US storage levels are now 5.8% above the five-year average, up from 4.8% for the week ending 25 October. Injections into underground storage were 69 Bcf, in line with Kpler’s assessment of 68 Bcf. For the week ending 8 November, a much weaker storage build is expected. With production having tapered down from October highs above 103 Bcf/d and demand picking up somewhat, Kpler expects a storage build of 35 Bcf.

2024 storage levels vs five-year average and five-year maximum (Bcf)

Source: EIA

LNG supply: Ras Laffan maintenance ends and Hurricane Rafael has limited impact on US LNG exports

Hurricane Rafael seemed to have sufficiently weakened to not pose a threat to any of the LNG facilities in the USGC, despite a 10% jump in Henry Hub prices on Monday. Feedgas injections remained high, reaching 13.7 Bcf/d for 13 October (+2% compared to last Wednesday), with no disruptions at any of the US terminals. Last week’s exports reached a three-week high of 1.8 mt, and exports for this week and next are expected to fall in the 1.7-1.8 mt mark.

The return to full production at the 8.9 mpta train 1 at the Ichthys terminal was delayed by two weeks to the start of December. This was due to ongoing inspections at the train’s heat exchanger. Exports from the terminal were indeed still low with just one shipment so far this week, and no vessels lined up for next week.

Tangguh’s train 3 restarted on 11 November after a three-day trip. Despite this, no cargo loadings were observed so far this week (the last loading was Flex Courageous on 08 November), and only one cargo was slated to load this week (Tangguh Palung) on 17 November.

Maintenance has ended at the 77 mtpa Ras Laffan plant in Qatar, as the 10-day moving average returned to pre-maintenance levels at ~0.2 mt/day. At the time of writing there were eleven ballast vessels waiting around Ras Laffan anchorage.

Ras Laffan 10-day moving average, as of 14/11/24 10h30 GMT:

Source: Kpler Insight

Weekly exports out of Nigeria’s 22 mtpa Bonny LNG have been on an upward trend since the second half of this year, with the 10-day moving average consistently over last year’s level (except during a downtime earlier in October). This was due to higher domestic natural gas production, more feedgas availability for LNG production as well as government efforts to tighten security around the country’s oil and gas infrastructure. Weekly exports for this week are slated to reach 0.3-0.4 mt

‍

‍

Want access to Insights on a regular basis?

Through unbiased, expert-driven research and news, you’ll receive valuable information on supply, demand, and market movements, enabling you to make informed trading and risk management decisions.

Unbiased. Precise. Essential.

Curious? Request access to Kpler Insight today.