Pricewatch l 12 June 2024 I Gas Matters Today

US natural gas futures were supercharged by persistent forecasts of scorching weather in the second half of June, along with a reported drop in Lower 48 production, to push well past the three-dollar threshold.

The latest weather forecasts suggest that temperatures will break records for the time of year across the Lower 48 states. The July contract jumped 7.7% to USD 3.13/MMBtu, the highest month-ahead close since mid-January.

Underpinning the recent rally in Henry Hub futures is a narrowing storage surplus, though it remains above the five-year maximum-minimum range. Month-ahead prices are now double what they were a few weeks ago.

Price movements in other energy markets were nowhere near as excited, all below 1% and a mix of upwards and downwards.

European gas futures diverged in local currency, with TTF up 0.1% and NBP down 0.3%, but in US dollars TTF was down 0.7% to USD 10.85/MMBtu and NBP down 0.8% to USD 10.32/MMBtu.

The US dollar has been approaching a year high in the run-up to the latest data on inflation, due out later on Wednesday, and the latest policy indication from the Federal Reserve’s Federal Open Market Committee – the so-called “dot-plot” – also due to be announced today.

The closely watched dot-plot shows officials’ expectations of possible interest rate changes to come, but the expectation for today is that rates will be held where they are.

Sign up here for Gas Matters Today's free daily newsletters, with top news, price reporting, and more 

In Asia, JKM remained stable but elevated, edging up 0.3% to USD 12.00/MMBtu. JKM has been significantly above TTF because heat waves in Asia in recent weeks have boosted demand for LNG. Conversely, weather in north-west Europe in recent weeks has been on the cool side for the time of year.

The TTF-JKM spread widened on Tuesday to USD 1.15/MMBtu.

In Europe, API2 coal was down 0.9% to USD 4.35/MMBtu, mainly due to the stronger dollar but also influenced by the gas price drop.

Oil prices edged upwards, with Brent rising 0.4% to USD 81.92/barrel and WTI rising 0.2% to USD 77.90/barrel. The large swings that occurred around the recent OPEC+ meeting appear to have subsided, at least for now.

Unprecedented oil supply capacity surplus by 2030

Today marks the publication by the International Energy Agency (IEA) of its annual oil market report, alongside an abbreviated edition of its usual monthly report.

The monthly report notes that: “Brent futures fell by USD 6/barrel in May, before tumbling further in early June after the OPEC+ alliance announced plans to gradually unwind last year’s extra voluntary output cuts starting in the fourth quarter of 2024.

“Traders’ initial response was overwhelmingly bearish, with prices falling to a low of around USD 77.50/barrel, but OPEC+ officials quickly reiterated that a rollback of output reductions will be contingent on market conditions.”

The IEA’s annual report, Oil 2024, claims to provide a “comprehensive overview of evolving oil supply and demand dynamics through to 2030”.

It concludes that: “Divergent regional economic trajectories and the accelerating deployment of clean and energy-saving technologies are combining to progressively slow the pace of oil demand growth, with a plateau emerging in the final years of our forecast.”

It adds that “surplus global supply capacity will reach unprecedented levels by 2030”.

WTI, NBP, TTF and EU CO2 data from ICE. Henry Hub, JKM and API2 data from CME. Prices in USD/MMBtu based on exchange rates at last market close. All monetary values rounded to nearest whole cent/penny. Text and graphic copyright © Gas Strategies, all rights.

Got a question or comment about this story or other energy matters? Drop our editor, Penny Sukhraj, a line [email protected]