Maintenance work at Norwegian and supply concerns due to conflicts in the Middle East and Ukraine will support natural gas and LNG prices in the short term, RBC Capital Markets said in a note on Thursday.
All of these factors caused the risk barometer to rise “one level higher” this summer, the bank said.
Maintenance work and unplanned outages in Norway, Europe’s largest natural gas supplier, are the price drivers to watch this summer, according to RBC Capital Markets.
A new wave of planned maintenance is due in September, which could put upward pressure on European prices as well as global LNG prices as competition for cargoes of the frozen fuel could increase, RBC analysts noted.
Earlier this summer, unplanned outages led to several increases in European gas prices.
The failure of the Sleipner hub in June caused Dutch TTF Natural Gas Futures, the benchmark for European gas trading, to rise 10% in a single day on June 3 to their highest level in six months.
The unplanned outages highlighted the vulnerability of Europe, which relies on natural gas imports. Norway had become Europe’s largest gas supplier following the Russian invasion of Ukraine and the collapse of Russian gas exports to the EU.
Against the backdrop of concerns about a possible halt in Russian pipeline deliveries via Ukraine, the price reached its highest level this year last week.
Late last week, the flow of natural gas from Russia to Europe via Ukraine continued despite clashes on the Russian-Ukrainian border near the only gas metering station that still sends Russian gas westward to Europe.
Even as tensions between Ukraine and Russia escalated due to the Ukrainian invasion of the Russian Kursk region, both sides signaled that they had no intention of disrupting pipeline gas supplies to Europe via Ukraine.
While gas and LNG prices are likely to be supported by supply concerns in the short term, prices could become more stable in the medium to long term as a wave of new LNG export projects enter the market, RBC said.
From 2025 onwards, a flood of liquefied natural gas (LNG) will drive normalisation, the bank noted.
By Charles Kennedy for Oilprice.com
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