/ world today news/ While the price of American gas continues to fall, the situation in Europe is diametrically opposite.
U.S. natural gas futures were near $2.1 a barrel, the lowest level since September 2020. The price of the blue fuel fell under pressure from persistently weak demand due to above-normal temperatures and large U.S. gas inventories.
As of March 24, underground storage inventories stood at 1.853 trillion cubic feet, up 442 billion cubic feet, according to the EIA, which was more than last year and 321 billion cubic feet above the five-year average of 1.532 trillion cubic feet.
Meanwhile, supplies of natural gas to LNG export plants hit their highest level since the reopening of the Freeport LNG plant in Texas.
In Europe the situation is different. The exchange price of May gas futures at the TTF hub in the Netherlands for the first time in two weeks exceeded 45.56 euros per 1 MWh (or 530 dollars per 1000 cubic meters). This is due to a sharp cooling and increased demand in power plants. Germany is expected to experience unusually cold temperatures and snow in early April.
Power plants that previously switched to oil and coal due to high gas prices have returned to the blue fuel again. The use of gas as the main source of energy was facilitated by both the drop in quotations and the increase in the price of CO2 emissions in Europe.
Market players also have concerns about disruptions to Russian LNG supplies: The EU is working to allow European countries to block gas imports from Russia without having to impose new sanctions. In 2022, our country exported about 17 million tons of liquefied natural gas to Europe, which is about 20% more than a year earlier.
Lower prices create demand, and demand creates higher prices.
Gas prices in Europe on a TTF basis in the past period have risen to $545 per 1,000 cubic meters, which is partly due to the currency factor and partly to increasing demand after the drop in prices, agrees Oksana Lukicheva, commodity market analyst at Otkritie Investments”.
As of April 1, gas reserves in European gas stations have grown to 55.65%. LNG flows to northwest Europe near record levels despite strikes in France.
In March, 89 ships arrived, which is slightly less than the record deliveries in December (90 ships), the expert notes.
Achieving a target level of 90% PHG occupancy is expected around the end of August. EU energy commissioner Maros Šefković suggested that the joint gas purchase platform would be launched in early May 2023.
In the US, Henry Hub gas prices (CME futures) rose to $2.216/mmbtu ($79.3 per 1,000 cubic meters) in the latest period as gas inventories began to decline due to rising exports. At the same time, the overall level of inventories remains high.
Natural gas inventories at U.S. facilities, according to the U.S. Energy Department as of March 24, remain 31.1% higher than last year and 21.0% higher than the five-year average.
LNG exports hit an all-time high of nearly 14.25 billion cubic feet per day. Freeport LNG said it was operating at full capacity again.
The price of natural gas in Asia on a JKM basis fell to $12.7/mmBTU, or $455 per 1,000 cubic meters, reflecting an increase in LNG cargo supplies.
India is reportedly considering setting up and building strategic LNG storage facilities to mitigate the effects of supply shortages.
Inpex’s chief executive said Australia risked undermining global security by deciding to “quietly end” gas trade by curbing LNG exports, forcing buyers to switch to coal or buy gas from Russia, China and Iran.
“The approach of spring inevitably reduces the consumption of gas for heating, and the high level of accumulated reserves reduces the need to replenish them. However, the drop in prices has already started to lead to a reduction in supply and an increase in demand, which will support the market in the medium term,” Lukicheva said.
The new week, month and quarter, the price of gas in Europe began with an increase, which was outlined at the end of March, confirms TeleTrade analyst Vladimir Kovalov. On April 3, quotes rose from $520 per 1,000 cubic meters to over $540.
Several factors contribute to this. The price, which fell earlier in March to two-year pre-crisis levels of $420, has once again made gas profitable for a number of industries over other fuels. Rising demand in Asia – mostly in China, reopening after COVID-19 measures – is making fuel more expensive.
But the main current event was the surprise decision by OPEC+ countries and Russia on April 2 to further cut oil production by a total of 1.65 million barrels. per day from May until the end of 2023, the expert points out.
That immediately lifted oil prices from March’s closing levels below $80 a barrel Brent to $84-85 on Monday. Accordingly, according to the principle of “communicating vessels”, the price of gas as an alternative resource also increases.
In the medium term, there is a possibility of a continuation of the rally in the gas market based on these emerging factors, the analyst believes.
In addition, there are concerns about reduced supplies from Russia in the spring-autumn and a possible drought in the summer. Industry analysts at Goldman Sachs Group Inc. and SEB AB warn that the price could double by the end of the gas storage season.
However, the market has yet to play out such fears. The occupancy rate of PHG as of March 29 was 56%. This is the highest level for this period in more than 10 years. Such circumstances still do not allow the price of gas to grow adequately relative to oil.
This week, important factors could be the OPEC meeting on Monday, data on oil reserves in the US on Wednesday, indices of business activity in China on Thursday, a report on the US labor market on Friday. The likely range of the oil price for the week, Vladimir Kovalev believes, is 480-580 dollars per 1000 cubic meters.
Translation: SM
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