June 18, 2024

TTF rallies on supply concerns, but Asian LNG market remains balanced. Henry Hub hits the $3/MMBtu mark.

European TTF front-month price outlook: Steady

Kpler Insight anticipates a steady outlook for TTF front-month contracts over the coming week. Price direction is likely to be influenced by the timely return of Norwegian gas assets to service, improved renewable power generation, and rising temperatures next week. However, support could still come from uncertainties surrounding Russian pipeline flows and possible extension of LNG supply outages.

Asian LNG front-month price outlook: Steady

Asian LNG front-month prices are expected to be steady next week as the market remains balanced, despite a recent unplanned outage at Australia’s Wheatstone LNG which could see some Japanese offtakers seeking replacement cargoes. Higher temperature forecast in Northeast Asia next week are also expected to be offset by cooler weather in South and Southeast Asia with the monsoon season approaching.

US Henry Hub front-month price outlook: Bearish

Henry Hub front-month futures prices are expected to decline in the upcoming week. Producers have incentives to continue to ramp up supply. Temperature forecasts are a bit uncertain. LNG feedgas demand is expected to remain steady. Storage balances continue to tighten.

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

Europe: TTF rallies on supply concerns but outlook remains steady as temperatures return to seasonal norm and renewables power generation improves

The European TTF front-month contract closed at $11.13/MMBtu on 12 June, up 50 cents/MMBtu w/w, driven by concerns about global LNG balance tightening and Russian pipeline supply.

Gassco data shows Norway’s 80 mcm/d Nyhamna onshore gas processing facility returned online as expected last Friday, easing market concerns despite a smaller issue at the Visund gas field, which took 15 mcm/d of pipe supply offline at the weekend for an undetermined time.  

Market concerns were raised as LNG imports into Europe remain lower y/y and European underground storages are set to slip below year-ago levels as the peak gas storage surplus recorded in May continues to decline.

Concerns about remaining Russian pipeline flows to Europe also continued this week as the Arbitration Institute of the Stockholm Chamber of Commerce (SCC) recently awarded more than €13 billion in damages to Germany’s Uniper SE for Russian gas volumes not supplied by Gazprom since 2022. While Kpler Insight believes Russian courts are unlikely to reinforce the SCC´s decision, countries dependent on Russian pipe supply such as Austria brace for disruptions of flows earlier than anticipated this summer. In turn, a tightening LNG market this summer could see Europe in increased competition for LNG cargoes against growing Asian demand. Further tightening of the LNG market could manifest over the summer should demand from Egypt and South America also increase. Kpler Insight has factored the latter into our European storage forecast, nevertheless, expecting it will be full by September.

Despite TTF prices rallying this week, Kpler Insight retains a steady outlook for next week. The market will be eyeing the recent Wheatstone LNG outage, targeted to last only several days, but the plant could take longer to restart. Additionally, the return of several LNG export plants, including Brunei, Gorgon, and Bintulu, are easing the supply outlook for next week. Cor-E data shows temperatures are expected to rise back to seasonal norms early next week, and renewable power generation is set to improve w/w.

Asia: Balanced market to keep LNG prices steady, but unplanned Wheatstone outage provides some upside

Asian LNG front-month prices were steady last week, rising by 6 cents/MMBtu w/w to close at $12.03/MMBtu on 12 June, as the market remained balanced. This was despite a recent unplanned outage at Australia’s Wheatstone LNG on 10 June and power demand being supported in northern China amid above-average temperatures. In South Korea, the 1,400-MW Shin Kori nuclear unit 2 also suffered an outage on Monday, though overall power supply in the country appears to remain strong and unlikely to drive prices on the prompt.

Next week, Kpler Insight expects Asian LNG prices to be stable as some buyers likely continue a wait and see approach for their summer procurements despite hotter temperatures forecast in Japan and South Korea. This is on the back of relatively sufficient LNG stocks in Japan, held by major power utilities, with stocks slipping to 2.1 mt on 9 June but still in line with the five-year average. However, the outage at Wheatstone LNG provides an upside, if the outage is prolonged longer, with some Japanese offtakers likely to seek replacement cargoes.  

Meanwhile, cooler weather expected from the approaching monsoon season across South and Southeast Asia will likely provide some bearishness on prices through lower cooling requirements. Bangladesh’s Summit LNG also remains shut after being hit by Cyclone Remal in late May, with the FSRU possibly sent to Singapore for repairs and expected to return after three weeks.

Japan LNG inventory for major power companies (mt)


Source: METI, Kpler

US: Demand set to increase slightly as supply increases loom

US Henry Hub front-month futures prices increased by $0.29/MMBtu from 2.76/MMBtu on 5 June to $3.05/MMBtu on 12 June.

Power burns have been trending higher, although some more moderate weather over the past few days led to lower volumes than were seen earlier in the week. Supply remained constrained, but production has been creeping back up from the lows seen earlier in the year. LNG volumes remained relatively stable as volumes at Sabine Pass have mostly recovered.

Looking ahead, Kpler Insight believes that supply will continue to increase with seasonally higher power burns, higher prices and increasingly lower storage inventories enabling companies to reduce their supply cuts. The startup of the 2 bcfd Mountain Valley Pipeline will also enable producers to capture more value from their production in the Appalachia region, one of the areas where production has been affected by cuts, as they bring more supply to market in the higher priced Southeast region. Mountain Valley Pipeline is owned by EQT, the largest gas producer in the USA which has been cutting production by 1 bcfd since February due to low prices.

Power demand growth should continue in the coming weeks as temperatures heat up. However, weather models are a bit uncertain with the GFS showing signs of some moderate temperatures over the next few days and the European model looking a bit warmer. Relatively mild temperatures are also showing up in the forecast for the end of June, which could weaken demand growth.

Current cash prices for basis points near the Mountain Valley Pipeline ($/MMBtu)


Source: NGI

LNG supply: Mixed signals in the Pacific Basin

The 4.4 mtpa Peru LNG plant is set to remain offline for 2 weeks due to planned maintenance. No cargoes were lifted there since 31 May, and the Pan Americas seems to have diverted away from the terminal on 11 June (its new destination and current status are still to be confirmed). The project typically loads 1-2 cargoes per week mostly to Europe (56% of exports were shipped there in 2023).  

It is likely that the 8.9 mtpa Wheatstone plant is offline and will be so for at least a few days, due to repairs on the fuel gas system. The restart date is not yet known at the time of writing and could take longer than previously expected. The dip has yet to be felt, with the last loading on 10 June onboard Flex Freedom, which was most likely taken from existing storage at the plant. The plant typically exports 2-3 cargoes per week, and Flex Freedom is likely to be the last one until the repairs are completed.

Southeast Asian supply was slowly ramping as loadings increased at Lumut I and Bintulu. Both terminals underwent some maintenance earlier in the month, and cumulative exports have been since been increasing for 3 consecutive weeks, with 442kt from Bintulu (+6% w/w) and 66kt from Lumut I (stable w/w) for week starting 03 June. Exports are expected to continue rising to 0.5 mt for next week, however this still remains slightly below seasonal averages.

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