February 23, 2024

Despite freezing temperatures in Northwest Europe and delivery disruptions at Australia Pacific LNG due to vessel outages, Title Transfer Facility (TTF) prices were down 8.7 percent to $13.71 per million British thermal units (MMBtu) on November 28 from last week’s highest level.

That’s what Rystad Energy Senior Analyst Wei Xiong stated in the company’s latest gas and LNG market update, which was sent to Rigzone on Thursday.

“Ongoing bearish sentiment is due to a muted gas demand outlook and ample inventories in the northern hemisphere,” Xiong noted in the update.

“Underground gas storage facilities in Europe were 97.4 percent full at 111.98 billion cubic meters as of November 26, compared to the five-year midpoint at 98 billion cubic meters, despite the start of net withdrawals in early November,” Xiong added.

In the update, the Rystad analyst said LNG exports from the nine million ton per annum Australia Pacific LNG (APLNG) facility on Australia’s east coast are “presently disrupted, hindering the departure of LNG tanker CESI Qing Dao”.

“Two cargoes have been delayed so far with more delays possible. Rystad Energy’s LNG Trade Tracker shows that the plant’s 30-day rolling average utilization was around 100 percent as of November 27 compared to 120 percent a week earlier,” Xiong added.

“APLNG typically exports one cargo every two-four days, meaning the disruption could impact around 0.3 million tons of LNG if the problems persist for two weeks. Feedgas to APLNG has been reduced with increased flows redirected to eastern Australia’s local gas market,” Xiong continued.

Elsewhere in Australia, Shell’s 3.6 million ton per annum Prelude FLNG is expected to restart operations in early December, Xiong noted in the report. This follows maintenance which began in late August, Xiong highlighted. The outage is estimated to have impacted about one million tons of production, the Rystad analyst outlined in the update.

Xiong also pointed out in the update that, in mid-November, Chevron’s Gorgon LNG plant resumed operations at its third liquefaction train with 5.2 million tons per annum of capacity “following an electrical incident last month, which led to a production loss of 0.2 million tons”.

“For 2023 to-date, over 3.7 million tons of production has been lost in Australia due to liquefaction plant outages,” Xiong noted.

Xiong stated in the update that northwest Europe has started to see temperatures fall below seasonal norms this week.

“In Germany, the region’s largest gas-consuming country, temperatures are expected to be below zero through December 9, alongside snowy conditions,” Xiong added.

“This will drive up heating demand but is unlikely to reverse the current bearish demand outlook, given soft industrial activity and healthy renewable energy output in the region,” Xiong continued.

High storage levels are also hindering gas prices from moving higher, Xiong said in the update.

“Germany’s underground storage facilities were 99 percent full as of November 26, compared with 97.8 percent this time last year,” Xiong added.

The Rystad analyst highlighted in the update that piped gas flows into Europe have been “largely stable” in recent weeks and said Russian flows were up from 82.57 million cubic meters per day (MMcmd) a week earlier to 92.45 MMcmd as of November 26.

“Flows from Norway fell slightly to 345.59 MMcmd on November 27 from 352.19 MMcmd a week earlier,” Xiong said in the update.

In a report sent to Rigzone on Friday, analysts at BMI, a Fitch Solutions company, noted that European natural gas prices “declined sharply over the last week, with front month Dutch TTF falling by 15.6 percent to EUR39.6/MWh”.

“Despite the onset of the first extended bout of unseasonably cold weather across Western Europe the expected jump in consumption has done little to support prices,” the analysts stated in that report.

“LNG flows continue to increase at 16 percent above the 30 day average adding to the steady imports from Norway. The strong inflows have ensured that a repeat of the energy crisis of 2022 is unlikely to be repeated,” they added.

“A slow start to drawdowns in storage, currently at 97 percent of full capacity, ensures that rationing of natural gas would be unlikely without a significant stoppage in LNG and pipeline flows from multiple sources along with above average consumption this winter,” they continued.

“Both seem unlikely at this point, with the risk of an unseasonably cold winter being the most uncertain,” the analysts went on to state.

To contact the author, email andreas.exarheas@rigzone.com

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