NW Europe gas capacity full as LNG vessels turn into floating storage units
Russia continues to wield its energy weapon surgically with Finland the latest to feel the scalpel.
Payments in rubles looks to be resolved for now as a working compromise has been reached by the EU and Russia.
LNG vessels continue to head to Northwest Europe for regasification with gas export pipelines from the region now at capacity, as a result spot prices for LNG in Asia are trading higher than Europe.
At the end of last week, Gasum, Finland’s state-owned gas wholesaler was informed by Gazprom Export on 20th that deliveries of gas would halt at 7:00AM on 21st May, Saturday.
Russia also decided to cut off Finland’s electricity supply following their application to join NATO and their refusal to pay for gas in rubles.
Finland is expected to be able to ease through the gas cut-off, as Russian gas imports only make up 5% of the country’s total energy needs, despite most of its gas coming from Russia.
Finland had already been prepared for a suspension of Russian gas imports, by diversifying its gas supply through the use of the BalticConnector, which is a Finnish-Estonian pipeline that grants Finland access to the Baltic region’s existing pipelines and LNG import terminals.
Therefore, given the relatively small impact to Finland and the greater market, the TTF actually ended lower at 86.50EUR/MWh at the end of Friday, as compared to 87.58 EUR/MWh at the time of open.
The EU had announced last week that countries will not be violating sanctions if they purchase Russian gas, provided that the transaction is completed in EUR or USD, with the Russian Gazprombank performing the conversion to rubles.
Gazprom is not likely to cut off gas supplies to other European countries considering that the transactions will ultimately still be completed in rubles, except on the technicality that EU countries are not directly paying in rubles themselves.
Whether or not this payment mechanism will continue to be viable in the long-run remains to be seen.
Finland is understood to have rejected payments despite this mechanism being made available to them.
Norwegian gas pipeline flows into the United Kingdom are expected to be slightly lower this week due to outages in Norwegian facilities, specifically through the Troll field.
The NBP as a result, has risen to 127GBp/Therm, up from 109GBp/Therm when the market opened.
The TTF has gradually fallen across the week to 82.4EUR/MWh or 25.54USD/MMBtu, on the back on steady gas pipeline flows, relatively warmer weather in Europe, as well as stable wind generation.
The NBP at 109GBp/therm or 13.59USD/MMBtu is still at a discount to the TTF at 82.4EUR/MWh or 25.54USD/MMBtu.
This is largely due to the lack of available slots and berths at regasification ports in Northwest Europe including the UK.
Gas export pipelines to neighbouring EU countries are already at maximum capacity, resulting in a glut of natural gas supply within those hubs.
These have caused the NW-EU LNG delivered prices, and gas hub prices such as the NBP and PVB to be at a big discount to the TTF.
The knock-on impact of this are increased waiting times for LNG vessels with loaded cargoes in the region, with many vessels waiting offshore as floating storages in the meantime.
This has reduced the number of vessels available in the market, which has in turn caused charter rates in the Atlantic to increase due to vessels still being busy with their previous deliveries.
In Asia, Asia-delivered prices have fallen in the past week tracking the TTF.
While demand has not returned in full swing, there has been increased interest in the spot market, resulting in Asia-delivered LNG now pricing higher than NW-EU delivered prices for now.
Given that most vessels on the spot market have been plying the Atlantic route to Europe which is also attracting the bulk of US cargoes, there is a dwindling supply of available vessels due to the increased number of floating storages in Northwest Europe.
Vessel supply in the Pacific has consequently been affected, causing Pacific charter rates to increase as well.
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