Asian LNG prices push Dutch hub to new highs
Prices for prompt and curve delivery at the Dutch gas hub, the Title Transfer Facility (TTF), have soared in the past few days as nearly all the available LNG from the US seems to be heading further east where prices are higher, a trading source at a major European utility told NGW June 22.
"August JKM [the SP Global assessment for spot cargos delivered ex-ship in Japan and Korea from which other Asian prices may be netted back] was bid $1.88/mn Btu above the Dutch TTF this morning, which translates into a premium of €5.40/MWh," he said.
Prices remain flat across the curve from June 23 until the end of Q1 2022 at around €31/MWh at market close; but the balance of summer and winter 21-22 prices are all about €2-3/MWh higher than they were mid-June. Balance of month closed about €31/MWh and day-ahead traded after the close at €31.45/MWh.
Coal prices and the carbon market were also a little higher but "gas is on its own," the trader said. "That sort of a price premium even makes it economic to ship LNG to Asia around South Africa, rather than wait to go through the Panama Canal." US LNG loadings have risen this month in response to exceptional demand from Asia and – to a lesser extent – Europe.
With European storage injections still far short of what is needed to replenish stocks in time for next winter, the question is where will the flexible gas come from if it is another long, cold season? Nord Stream 2 might be operational later this year but with declining Dutch production, there is not much volume elsewhere. Traders are therefore paying up for gas now as insurance.
Russian pipeline export monopoly Gazprom has so far this year resisted the temptation to book extra monthly capacity through Ukraine, wrong-footing the market – and upsetting Ukraine, which had been expecting higher transit revenues – with its return to a "value over volume" strategy. It has another week to do so, or July flows to Europe will be lower for ten days or so, as Nord Stream 1 goes on maintenance next month.
Brokerage Marex said in a comment that it has this week seen "a movement towards increased [US LNG] volumes. We will have to see if this sticks." It also said it had seen signs that coal availability in has dropped relative to the mean which can boost LNG demand to fill the shortfall.
This time last year European gas prices were so low that US liquefaction capacity was even shut in as sales into Europe would have lost money on a simple net-back basis.