Natural gas prices in Europe and Asia are recovering from losses of last week, with supply issues and strong buying driving gains so far this week.
In Europe on Tuesday, near-to-the-curve prices closed higher for securities transfer facility and national balance point contracts through August.
Russian gas giant Gazprom PJSC would not have participated in an auction to reserve additional capacity to bring natural gas through the Ukrainian transmission network to Europe, which would have increased supply to the market and accelerated resupply efforts on the continent. Although the company booked additional capacity this year, it was the second month in a row that it did not participate. Gazprom has entered into an agreement with Ukraine which currently requires it to transport 40 billion cubic meters of gas per year through Ukraine.
European prices got a shock on the news Tuesday after falling last week when the Biden administration lifted some sanctions against Russian pipeline developer Nord Stream 2, paving the way for more supplies to Europe if the 745 miles, 5.3 Bcf / d the project is complete.
“Reduced flows, competition with the Asian market and increased demand for fuel switching as we see multiple nuclear outages in Europe are all bullish factors contributing to the upside,” said Wolfgang Haider, analyst at Schneider Electric .
Haider said nuclear availability has been affected in several countries on the continent. Labor strikes are underway in France, a net exporter of electricity, which has shut down two reactors producing 1.2 GW.
While warmer weather is expected in the UK and parts of mainland Europe by the end of the week after a period of unusually cold weather, analysts at Engie EnergyScan said weak stocks European storage stocks would likely continue to support prices. Storage stocks were at 35% of capacity on Tuesday.
In Asia, meanwhile, spot prices continued to be valued above $ 10 / MMBtu amid strong buying in anticipation of warmer summer weather forecast. Droughts have hit Taiwan and southern China, limiting hydroelectric power and increasing the need for gas-fired electricity in the region. Supply issues in countries that include Australia also continue to reduce the amount of cash cargoes available.
Export terminals in the United States could face similar issues with the Atlantic hurricane season set to begin Tuesday (June 1) and end on November 30. The National Oceanic and Atmospheric Administration (NOAA) predicted another above-normal season last week with up to 20 named storms expected. NOAA does not expect the historic level of hurricane activity seen last year that has disrupted Gulf Coast export operations.
Despite inclement weather along the Gulf Coast in recent days causing heavy rains, U.S. feed gas nominations averaged over 10 Bcf / d on Monday and Tuesday. That’s outside recent highs of nearly 12 Bcf / d, but in line with levels seen last week.
Elsewhere last week, Total SE signed another sale and purchase agreement to provide a joint venture of ArcelorMittal SA and Nippon Steel Corp with 500,000 tonnes / year of liquefied natural gas until 2026.
Slow unloading reports and even requests to cancel shipments for delivery to India also continue as the country grapples with an increase in the number of Covid-19 cases. India’s stocks piled up for weeks as the number of cases increased and demand for energy reduced. Prices in Asia, however, remained stable, offset by a wave of supply and tendering with warmer weather looming.