NATGAS: Prices on both sides of the Atlantic have shown signs of life after their dramatic plunges this year. It’s a timely reminder that natgas is amongst the most volatile commodities, and further big price falls (see chart) should not be taken for granted. They’ve been a big driver of consumer and company relief this year, especially in Europe. German energy inflation is now only 3%, and its producer price rises plunged from 46% to 1%. But it’s natgas prices still double pre-Ukraine war levels. US prices have bounced off the key $2.00 MMBTu level as we enter the summer ‘cooling season’. Global supply is rising only 4% this year and Russian exports could be cut further. Whilst Asia leads demand growth and the coming El Nino adding uncertainty.
EU: TTF natgas prices recently doubled off lows as largest producer Norway extended summer maintenance shutdowns and no2 producer Holland brought forward the permanent closure of its huge Groningen field. The biggest price falls may now be behind us. The EU’s gas storage is a reassuring 74%, well-ahead of schedule to hit its 90% target by the November start of the ‘winter season’. But others like the UK, with only 10% the storage capacity, remain vulnerable to price swings. Natgas prices are now below parity with Brent crude, facing off against rising LNG import competition from Asia, and with chances of last remaining Russian flows still being cut.
US: It’s the world’s largest natgas producer, at 25% of total, and uses only 22% of it. This makes it the 2nd biggest exporter, after Russia and ahead of the Middle East. Similar to Europe, the bulk of natgas price weakness may now be behind us. The domestic market is finally tightening. With downturns in gas drilling rig activity and production keeping prices above the historically key $2.0/MMBTu level. The outlook for a warmer El Nino driven summer ‘cooling season’ is on the cards. Along with higher LNG demand from China’s reopening and Japan’s economic recovery.
All data, figures & charts are valid as of 22/06/2023.