OPEC-Plus Oil Cuts Keep Pressure on European Natural Gas Prices …

The surprise decision over the weekend by OPEC-plus countries to further cut crude production helped keep a rally in European natural gas prices alive as concerns over fuel supplies again bubbled up as the week got underway.

The slump in natural gas prices amid a mild winter has made the fuel more competitive with oil and coal this year, which have risen in recent sessions and helped support the Title Transfer Facility (TTF). The decision by OPEC-plus[1] to cut another 1.1 million b/d on top of reduced Russian output and the group’s previously announced cuts pushed Brent prices higher Monday, “feeding inflationary fears,” said Rystad Energy’s Jorge Leon, senior vice president. [Want to know how global LNG demand impacts North American fundamentals?

To find out, subscribe to LNG Insight.][2] “If fully delivered, the announced cut would further tighten an already fundamentally tight oil market,” he added. While European natural gas storage inventories are at their highest level in more than a decade, the market remains sensitive to any perceived threat to energy supplies as the continent continues to wean itself off Russian imports.

TTF jumped 13% last week with below-normal temperatures forecast for much of the continent during the beginning of April. Problems disclosed in a U.S. regulatory filing[3] last week by Venture Global LNG Inc. with commissioning the Calcasieu Pass terminal in the United States also jolted the market and pushed prices higher. The OPEC-plus news helped TTF gain another 7% on Monday, with the prompt contract finishing above £18/MMBtu for the first time since February.

For now, supplies reaching the continent remain robust. Kpler data showed that 148 liquefied natural gas cargoes carrying 6.08 million tons (Mt) landed in Northwest Europe last month. That’s close to a record of 7.17 Mt that arrived on 141 vessels in December.

Tudor, Pickering, Holt & Co. also noted on Friday that European gas inventories built by 3 Bcf over the previous week, compared to the five-year average draw of 28 Bcf over the same time. Overall, European storage is at 56% of capacity, well above the five-year average of 35% for this time of year. Analysts at Goldman Sachs led by Samantha Dart said in a note last week that stockpiles offer “little-to-no near-term support” for European gas prices.

But they cautioned that the longer TTF remains low, “the stronger the support to demand, especially as gas is now cheaper than coal for power generation.” If demand rises that could tighten the market heading into next winter, the firm said.

Prices Weak In Asia, United States

In Asia, meanwhile, JKM futures gained 8% last week as TTF rose. Europe still has the premium, though, as demand in Asia remains weak with the shoulder season in full swing. JKM spot prices were assessed in the low £10s/MMBtu Monday.

China gas demand remains subdued and regional storage inventories are said to be high, which is also weighing on prices. China also settled an LNG trade in yuan for the first time last week, according to the Shanghai Petroleum and Natural Gas Exchange. China National Offshore Oil Corp. and TotalEnergies SE completed the trade in Chinese currency.

In other news in the region, the Philippines is set to receive its first ever LNG cargo in mid-April, said commodities trader Vitol Inc. Vitol said it would load the cargo at Das Island in the United Arab Emirates to commission the Philippine’s first LNG import terminal in Batangas Bay. In the United States, Freeport LNG Development LP continued to ramp up operations at its export terminal on the upper Texas coast.

Feed gas nominations were at 2.1 Bcf on Monday, the highest since the plant was knocked offline[4] in June 2022 after an explosion. Feed gas deliveries started climbing[5] toward 2 Bcf last week, indicating that all three trains at the facility were operating for the first time in more than nine months. The export strength helped the May Henry Hub contract rebound Friday after three straight days of losses.

Freeport overshadowed both domestic trends and Venture Global’s announcement that the power island and heat steam recovery generator at Calcasieu Pass would require “extensive repairs and replacements.” The issues, the company said, are likely to delay commercial operations and obligations to fulfill contracts with long-term offtakers. Spot cargoes would continue to be loaded.

Henry Hub was again trading lower Monday after forecasts trended warmer over the weekend, sending futures tumbling. In other developments stateside, Cheniere Energy Inc. filed a formal application with federal regulators to add another two midscale liquefaction trains at its Corpus Christi LNG terminal in South Texas. The expansion, announced last year[6], would add 3.28 million metric tons/year (mmty).

The company is already building seven midscale trains[7] at the facility and prefiled for a 20 mmty expansion[8] at its Sabine Pass LNG facility in Louisiana. Cheniere said commercialization for the latest trains at Corpus Christi is complete, “with a majority of LNG export volumes from the project facilities committed via long-term sales contracts.” Another U.S. natural gas export developer, G2 Net-Zero LNG LLC, has scrapped plans for a terminal in Cameron Parish, LA.

The company was working to make the facility[9] the first LNG terminal with net-zero emissions on the Gulf Coast, but it told regulators in a filing that it is now focusing on developing net-zero greenhouse gas emission energy products instead.

References

1. ^ decision by OPEC-plus (www.naturalgasintel.com)
2. ^ [Want to know how global LNG demand impacts North American fundamentals?

   To find out, subscribe to LNG Insight.] (www.naturalgasintel.com)

3. ^ disclosed in a U.S. regulatory filing (www.naturalgasintel.com)
4. ^ knocked offline (www.naturalgasintel.com)
5. ^ started climbing (www.naturalgasintel.com)
6. ^ announced last year (www.naturalgasintel.com)
7. ^ seven midscale trains (www.naturalgasintel.com)
8. ^ 20 mmty expansion (www.naturalgasintel.com)
9. ^ working to make the facility (www.naturalgasintel.com)