An update from Rystad Energy analyst Christoph Halser on the gas and LNG market, sent to Rigzone by the Rystad team late Thursday, addressed some of the movements in the gas market this week, highlighting changes in the Title Transfer Facility (TTF), Northeast Asia spot LNG valuations and the Henry Hub price.

“Financial markets were dominated by recession fears this week after the release of pessimistic U.S. jobs data last Friday, which sent Japan’s Nikkei to its biggest loss since 1987,” the update said.

“However, gas markets have priced in fears of supply disruptions in the Middle East due to threats of retaliation from the Lebanon-based militant group Hezbollah and Iran following the assassination of Hamas leader Ismail Haniyeh in Tehran,” it said.

“In addition to a possible decline in Israeli gas production from the Tamar field and halted deliveries to Egypt via the Eastern Mediterranean Gas (EMG) subsea pipeline, Ukrainian forces confirmed on August 7 the seizure of the Sudzha gas metering station in Russia. The station is notably the entry point for Russian natural gas into the EU,” it said.

Global gas markets have generally seen a price increase in response to potential supply constraints, the update said, noting that gas prices on the TTF rose 11.6 percent week-on-week to $12.41 per million British thermal units (MMBtu) on August 7.

“While the realization of a likely economic downturn coincided with a weekly decline in Brent crude oil prices of 2.8 percent, spot prices for liquefied natural gas (LNG) from northwest Europe rose 8.9 percent during the week to $12.19 per MMBtu on August 7,” the update said.

“Meanwhile, spot LNG prices in Northeast Asia stood at $12.72 per MMBtu on August 7, up 4.9 percent from the previous week, while Henry Hub prices recovered to $2.11 per MMBtu,” it added.

The update noted that Henry Hub prices fell to $1.967 per MMBtu last Friday due to pessimistic fundamentals, “before falling further to $1.942 per MMBtu on August 5 amid recession fears and equity market losses.”

Since then, however, prices have recovered, the update said. “They stabilized above the $2 per MMBtu mark and closed at $2.112 per MMBtu on August 7.”

“Henry Hub prices rose 3.7 percent week-on-week from $2.036 per MMBtu in the middle of last week,” it said.

Looking at fundamentals, the update highlighted that U.S. dry gas production in the Lower 48 rose 0.5 percent to 102.4 billion cubic feet per day (Bcfd) last week, “while storage levels were 15.7 percent above the five-year average.”

“In the week ending July 26, gas storage inventory stood at 3,249 Bcf, after increasing by 18 Bcf in the previous week,” it said.

“Weekly average crude gas supply levels remained unchanged over the week, totaling 12.82 Bcfd over the last seven days,” it said.

The update also noted that Hurricane Debby made landfall in Florida on August 6, “cutting power to up to 300,000 residents across the state.”

“Combined with a storm in Ohio that caused disruption to approximately 100,000 residents, the power outages will cause short-term problems in supplying the United States with gas for electricity needs,” it said.

“For the current hurricane season through November 30, the Climate Prediction Center of the National Oceanic and Atmospheric Administration has calculated an 85 percent probability of above-average hurricane activity,” it said.

“However, the temperature outlook paints a positive picture for gas demand. Above-average temperatures are expected in all US regions towards the end of the month,” it said.

A separate gas and LNG market update from senior analyst Masanori Odaka, sent to Rigzone by Rystad last Thursday, highlighted that front-month Henry Hub gas prices fell 2.8 percent week-on-week to $2.1 per MMBtu on July 30.

“Dry gas production is maintaining a capacity of approximately 102 billion cubic feet per day,” the update said.

“Freeport LNG resumed operations on all three trains as feedgas volumes returned to over two billion cubic feet per day on July 28,” it added.

“We expect operators to increase activity throughout the remainder of the year as the contango curve (contango: higher futures prices than spot prices) has not yet been finalized. Producers are relying on higher forward prices to support their current investment forecasts, which have remained relatively flat,” the update continued.

Looking at demand, the update said that “the U.S. saw record prices for gas used to generate electricity last week.”

“This was supported by robust demand in most parts of the US, with the exception of the central US and Texas.
However, forecasts predict warmer weather until early August, so electricity demand is expected to remain high,” it said.

“Stronger demand will help protect the market from increased supply levels. Nevertheless, it is important to note that demand has little ability to impact weekly storage, which is still 16 percent above the five-year average,” the company warned.

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