European natural gas prices jumped on Tuesday on heightened supply concerns around ongoing disruptions to pipeline flows from Norway and LNG strikes in Australia, more than reversing Monday’s falls.
Prices in Asia, by contrast, remained unchanged. Meanwhile, oil prices took a break from their sustained rally as traders awaited an interest rate decision by the US Federal Reserve on Wednesday.
Norwegian network operator Gassco reported that production ramp-up at the giant Troll field was being delayed and that supplies from the field would be halted on Wednesday. The news prolonged weeks of uncertainty over maintenance at the field, though an end to this now appears to be in sight.
In Australia, workers and their unions at the Gorgon and Wheatstone LNG liquefaction plants have so far failed to hammer out an agreement with operator Chevron, despite a ramp-up of industrial stoppages to two sessions of 24 hours over the weekend.
Talks on Wednesday ended without a deal and all parties are now waiting to see what the Fair Work Commission, an industrial tribunal, says on Friday when it meets to review the dispute.
In Continental Europe, TTF front-month futures closed up 6.6% on Tuesday, from USD 10.81/MMBtu on Monday to USD 11.52/MMBtu. UK prices followed suit, with NBP up 6.8% from USD 10.85/MMBtu to USD 11.60/MMBtu.
While Europe remains highly sensitive to any developments impacting future supply, mild temperatures and high storage levels appear to be tempering price movements, for now. Storage facilities were 94.24% full on Monday, according to Gas Infrastructure Europe (GIE) data, and the expectation is that this will climb towards 100% ahead of the onset of the heating season.
Much depends on whether we see a mild or severe winter. Even with full storage, Europe will need high levels of LNG imports to see it through the winter – especially a harsh one.
In Asia, JKM remained flat at USD 13.33/MMBtu, meaning that the TTF-JKM spread narrowed significantly from USD 2.52/MMBtu on Monday to USD 1.81/MMBtu on Tuesday.
In the US, Henry Hub jumped 4.4%, from USD 2.73/MMBtu on Monday to USD 2.85/MMBtu on Tuesday – close to a six-week high – as output fell and supply to LNG export facilities climbed.
Analysts at Bank of America on Tuesday issued a note forecasting that mild winter could lead to prices falling below USD 2/MMBtu in the first quarter of 2024, as storage inventories approach five-year highs.
Oil prices took a pause from their sustained rally, with Brent edging down 0.1% from USD 94.43/barrel on Monday to USD 94.34/barrel on Tuesday. WTI was down 0.3%, from USD 91.48/barrel to USD 91.20/barrel. Traders are awaiting an interest rate decision from the US Federal Reserve on Wednesday because of the impact that a further rise would have on demand. Most analysts expect rates to remain where they are on this occasion.
Front-month futures and indexes at last close with day-on-day changes (click to enlarge):
Time references based on London GMT. Brent, 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.