Gas prices are stable in Europe except in the UK
Despite new geopolitical risks, gas prices in Europe are stabile except for the UK.
In the latest impact from geopolitics – Finland has applied to join NATO over the weekend, and Sweden is also planning to submit its application soon, that could further weigh on Russian gas supplies to Europe.
This adds further uncertainty to the market, following the sanctions on Gazprom units and other companies based in countries that have imposed sanctions on Russia, and following the force majeure at Ukraine’s key transit pipeline Sokhranivka last week.
Russia president Putin said it is a mistake for Finland to join NATO and in a first move, Russia has cut electricity supply to Finland.
However, there has not been any further response from Russia, such as reactions on gas supplies, although the likelihood remains in the near future.
As such, the upsides on European gas prices from Finland’s decision to join NATO have yet to appear.
On the contrary, TTF front-month price fell 3.8% from the settlement price 96.9 EUR/MWH on 13 May to 93.2 EUR/MWH as the time of writing, as concerns about possible violations of sanctions on Russia for gas payments ease.
The EU said companies could declare transactions completed after paying euros, but before exchanging euros into rubles by Russian banks.
In the UK, the rebounding NBP prices are due to low LNG imports to the UK with a noticeable drop in regasification capacity to 71% today from nearly 80% in the last few days. The UK has also increased exports of gas to Belgium and the Netherlands over the last week helping to shore up lost supplies of Russian gas.
Russian pipeline exports via main routes (Nord stream 1, Ukraine transit and Yamal pipeline) fell by 4.5% from a day earlier to 208 MCMD, mainly as the flows via the Ukraine transit dropped nearly 30% to 41.4 MCMD, continuing the impact from the Sokhranivka force majeure.
The potential impact from the drop in flows on prices appears limited today.
Norwegian pipeline exports to Europe remains largely flat at 319 MCMD, up by 0.7% from a day earlier. Meanwhile, the restart of the 18.4 Mcm/d Hammerfest LNG will be delayed to 23 May, from the original schedule for 17 May.
Once back in service it will be able to supply more gas to the Europe continent.
In the US, Henry hub price saw a different trend, rising to $7.774/MMBtu as the time of writing, up 1.5% from previous settlement, as the US gas storages remain 16% below the five-year average.
In Asia, there is good news from China, which is planning to ease Covid controls from late May and is aiming to resume normal productions and living environment from next month.
This is expected to boost industrial and transportation activities and support gas demand.
In the first four months, China witnessed a notable slowdown in gas demand, due to the lockdowns.
Asia spot LNG prices are currently seeing nearly $7/MMBtu discount to TTF.
The price differential will likely shrink if China eases pandemic controls as planned.
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