Natural gas prices remain high in the US, bullish outlook for TTF
Despite recent declines, US natural prices remain elevated as domestic consumption increases and growing exports to Europe continue to sustain high prices.
Prices look set to increase further in the short term, with domestic demand rising as a cold snap is forecasted for much of the US, particularly in the Northeast.
Contributing more upward pressure, current storage levels are 23% lower than this time in 2021 and 17% lower than the five-year average for this week.
Gas prices in Europe remain somewhat muted compared to recent highs, with the TTF hovering around €93/MWh ($30/MMBtu).
Flows of Russian gas to Europe continue to decline with lower nominations from buyers with payment uncertainties.
On Friday, the EU said that buyers may be able to work around natural gas payment in rubles if they fulfill their contract obligation after paying in euros or dollars, which are then converted into rubles independently from buyers.
Norwegian flows increased again after the drop to a level of 296 MCMD on Friday due to expected maintenance.
Norwegian pipeline exports have jumped 2% vs. yesterday, hitting 306 MCMD.
A cold snap could be right around the corner for large swathes of Europe, combined with lower wind power generation projections means demand for gas-to-power switching is likely to spike, pushing gas prices higher.
The search to replace Russian gas with other sources is bringing opportunities to exporters other than the US.
Italy`s Eni signed preliminary agreements with both Angola and Congo to secure gas supplies, easing some of the medium and long-term supply concerns.
Known exporters are well positioned to sign new long-term contracts with European buyers in a deal that will benefit both sides.
EU members are still working to cut dependence on Russian oil and gas, so far with little success, and pressure to enact more stringent sanctions on the country are increasing further.
Although the EU Commission is working on the sixth package of sanctions against Russia, an embargo on oil exports from Russia seems unlikely for now.
Asian prices keep following TTF and were negotiated at $25.49/MMBtu with a $4.5/MMBtu discount over European indexes.
Concerns over industrial demand destruction due to continuing Covid-19 lockdowns in China are likely to put downward pressure on prices, which may be balanced by emerging demand from price-sensitive South Asia.
Oil prices slipped around 6% today, and 8% week-over-week, as fears of a Covid-19 lockdown in Beijing poses a serious threat to demand.
The downward momentum caused by Chinese lockdowns is also providing a bearish readthrough for the rest of the energy commodity complex.
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