European gas demand pushes prices up further
Gas prices rose further in the teeth of lower-than-hoped-for supply June 29, with the price for summer and next winter delivery higher at the close at the Dutch benchmark hub, the Title Transfer Facility (TTF).
Continuing the trend of the past few weeks, there is almost no difference between the three quarters, with Q3, Q4 and Q1 2022 trading in the narrow range of €33.25-33.65/MWh. July, trading as high as €33.65/MWh at the close, was even more expensive than the Q4 2021-Q1 2022 strip, which last traded at €33.575/MWh.
Asian buyers seem still prepared to pay more for LNG than their European counterparts. US Henry Hub prices have also been rising over the past few weeks as demand for liquefaction has gone up, but still leaving an attractive netback.
It is not until next summer that European prices appreciably soften and seasonality returns once more. Summer 2022 traded last at €21.9/MWh and the following winter at €23.1/MWh at the TTF.
On the supply side, among the reasons for the high prices is the ongoing maintenance in the UK and Norwegian offshore sectors and pipeline maintenance onshore. And Russian exporter Gazprom has – once again – chosen not to book additional pipeline capacity to deliver more gas through Ukraine, sticking with the amount agreed on in December 2019. This has wrong-footed traders who had expected Gazprom to chase demand, but with less US LNG coming to Europe, it is easier for Gazprom to retain market share.
On the demand side, the weather has been unusually cool for June in northwest Europe. It has also not been very windy, so gas has been used for heating and for power generation. Storage injections have been running a little slower than usual as a result, with Europe still not half full at 47% on average, with July about to start. This is giving traders the impetus to pay up now, rather than pay another €10-20/MWh when winter approaches.
Bucking the trend are Italy and Spain, which have injected a lot more than the average, following deals done with Algerian Sonatrach to increase pipeline exports. Oil-indexed contracts are still much cheaper than TTF prices. Also Hungary and Poland, for different reasons, also have filled up more of their facilities.
By next winter it is possible that Nord Stream 2 will be operational, although how much overall capacity Gazprom will have at its disposal in the Opal pipeline remains unknown. The first of the two Nord Stream 2 lines – each can carry 27.5bn m³/yr – is ready for filling with gas and the second strand is very near completion.
When asked by NGW June 29 about the technical certification of Nord Stream 2 that is needed for commissioning to start – and whether a replacement had been found following the November 2020 departure of Norwegian certification company DNV – a spokesman for the Swiss-based operator only said: "The planning, construction and operation of Nord Stream 2 does and will comply with national permits and relevant legislation as well as with relevant technical standards."