Over the past week, there has been a significant jump in natural gas prices in response to reports that deliveries across the Red Sea are becoming more difficult due to attacks by Yemen’s Houthis on shipping vessels.
Traders are now being cautious about purchasing additional gas, leading to a short-term decline in prices. On Monday, TTF prices fell to 35.55 euros per megawatt-hour, one of the lowest in two years.
Prices are also affected by moderate temperatures, which reduce the demand for heating gas, with supply exceeding demand. Weak economic forecasts also have an impact on the decline in demand. Temperatures are expected to be 4.5°C above average over the next two weeks, which could lead to lower demand and prices.
What is the situation with gas trading in Ukraine told by UEB LLC (Ukrainian Energy Exchange) https://www.ueex.com.ua/presscenter/news/prodazh-prirodnogo-gazu-na-birzhi-ueb/. Meanwhile, the Asian liquefied natural gas (LNG) futures market shows that the JKM Platts Future Index traded at US$427 per thousand cubic meters last Thursday.
What next for the natural gas market?
Although stronger Asian markets may support European prices in the coming months, the overall trend points to a weakening trend. Problems with the passage of gas tankers through the Panama and Suez Canals remain, which leads to increased insurance costs and the need to re-plan routes, extending delivery times.
Also, new restrictions on transit through the Panama Canal due to prolonged drought will start in January. In the long term, China is changing its gas strategy, reducing its dependence on LNG imports and refocusing on alternative energy sources in the south of the country to replace pipeline gas.
Agreements for the next month at all energy hubs considered showed similar dynamics regarding current (spot) prices – an average increase of 5.38%. Contract prices for the next quarter exceeded spot prices by 6.12% on average. The average price for seasonal contracts was 36.95 euros per megawatt-hour, showing an increase of 9.16% compared to spot prices.
Futures for liquefied natural gas (LNG) delivered to North-West Europe (LNG North West Europe Marker) traded at $368 per thousand cubic meters.
European gas storage facilities were 87.63% full as of December 20, up 0.5% from the previous day. That was the first increase since Nov. 19, according to Aggregated Gas Storage Inventory.
European LNG terminals operated with an average productivity of 68.57%. LNG exports from the United States reached 4.50 million tons in December, up 1.19 million tons from weekly supplies. About 48% of this volume was sent to Europe, 3% to Asia and 2% to South America, with the remaining volumes not yet assigned.
Summarizing the preliminary results of the year, it should be noted that the leaders in reducing gas supplies were Spain, France, Great Britain and Italy, while Germany saw a slight increase compared to the previous year.