Pricewatch l 7 June 2024 I Gas Matters Today

Crude oil prices continued to firm on Thursday amid a decision by the European Central Bank (ECB) to reduce interest rates ahead of the US Federal Reserve and the Bank of England. Lower interest rates are expected to bolster economic growth and consequently oil demand.

The ECB’s decision to reduce its main interest rate from a record high of 4% to 3.75% – the first cut in five years – is the second tangible sign this week that interest rate cuts are in the pipeline after months of fluctuating sentiment over their timing. Canada cut its official lending rate on Wednesday.

Front-month Brent gained 1.9% to settle at USD 79.87/barrel while WTI closed up 2.0% to USD 75.55/barrel. The second consecutive rise comes after a week-long slide that saw prices slump by 8% in the build-up to and aftermath of the OPEC+ meeting last Sunday.

US natural gas prices continued to rise despite the Energy Information Administration (EIA) reporting a larger-than-expected build in its weekly gas storage data, with hotter weather forecast for later this month.

Month-ahead Henry Hub rose by 2.3% to USD 2.82/MMBtu – almost double what it was just a few weeks ago and raising the prospect of the price rising above the key USD 3/MMBtu threshold. Another 6% is all that is required.

In its usual weekly report, the EIA estimated working gas in storage at 2,893 Bcf as of 31 May, up 98 Bcf from the previous week and above the five-year historical range. Stocks were 373 Bcf higher year-on-year and 581 Bcf above the five-year average of 2,312 Bcf for this time of year.

The build of 98 Bcf exceeded market expectations but, while the surplus remains historically large, the gap with the five-year average continues to narrow. It currently stands at 25%, down from 26.5% last week and 29% the week before. In mid-April it was 36%.

In Europe, gas prices edged up despite the anticipated return to service of the Nyhamna gas processing plant in Norway and the Easington import terminal in the UK, following repairs to a pipe at the Sleipner Riser platform in the North Sea.

Outages in French LNG import terminals are affecting natural gas send-out and worries persist over the fate of Russian pipeline gas exports through Austria.

In continental Europe, the July TTF contract was up 0.8%, from USD 10.66/MMBtu on Wednesday to USD 10.74/MMBtu on Thursday, and moving higher on Friday morning.

In the UK, NBP was up 1.2%, from USD 10.16/MMBtu to USD 10.28/MMBtu, and rising on Friday morning.

In Asia, the JKM LNG benchmark remained stable, edging up 0.1%, from USD 11.97/MMBtu to USD 11.99/MMBtu.

European coal prices gave up more of Monday’s dramatic gains, with the expected return to service of Nyhamna. API2 fell by 2.0%, from USD 4.48/MMBtu on Wednesday to USD 4.39/MMBtu on Thursday.

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.