European gas prices fall despite Norwegian outage - Rystad Energy’s Gas and LNG Market Update

Asian spot liquefied natural gas (LNG) prices for February delivery fell by 3% to around $14.4 per million British thermal units (MMBtu) on 8 January, with February’s prices likely to settle at around $14.3 per MMBtu.

Meanwhile, European pipeline gas prices for January slid 7% to $13.8 per MMBtu on revised warmer forecasts.

Asia has sufficient access to LNG supply while Europe continues to pull cargoes produced in the US.

Asian spot liquefied natural gas (LNG) for December traded fell 1% week-on-week to approximately $13.4 per million British thermal units (MMBtu) on 22 October as Asian buyers seek to optimize procurement by locking in purchases at the cheaper end of the curve.

Meanwhile, January 2025 financial derivatives – which have, since 21 October, become more liquid than levels seen in December 2024 – traded 1% lower week-on-week at around $13.8 per MMBtu.

Front-month prices at the Dutch Title Transfer Facility (TTF) closed at $12.9 per MMBtu on 22 October, up 1.8% from the previous week amid reduced Norwegian production due to yearly maintenance.

Asia

Fundamentals remain weak in Asia with limited purchase interests stemming from China and South Korea, while some buyers such as CPC Corporation, Thailand's PTT, Bangladesh’s RPGCL and northeast Japanese power utility Tohoku Electric were seeking spot LNG for February and March delivery.

Previously, some Asian buyers with contracts from Malaysian LNG projects received delayed cargo delivery notice for January and February, possibly due to constrained production.

Asian spot LNG derivatives prices between February and March had flipped from backwardation into contango since 27 December, although the contango spread recently narrowed to $0.16 per MMBtu on 7 January.

The backwardation spread between March and April has gradually shown a narrowing trend, with the latest spread coming in at $0.1 per MMBtu on 7 January.

South Korea currently has reduced nuclear capacity from the 1.4-gigawatt (GW) Saeul unit 1, which is expected to last until early March.

In Japan, Kansai Electric’s 826-megawatt (MW) Takahama nuclear power plant (NPP) unit 2 and 1.18-GW Ohi NPP unit 4 remain offline until March due to planned maintenance.

The next NPPs in Japan to conduct planned maintenance are the Takahama unit 2 that will undergo maintenance from 10 February to early March, and the Takahama unit 3 that will conduct maintenance from 22 February until early June.

Despite the additional available capacity year-on-year, the recent colder temperatures in multiple regions across Japan have led to higher power prices in the country.

On the Japan Electric Power Exchange (JEPX), day-ahead 24-hour average price reached JPY 16.29 ($0.10) per kilowatt-hour (kWh) on 9 January, 44% higher than a year ago.

Similarly, day-ahead day-time prices (from 8:00am to 10:00 pm Japan time) reached JPY 16.75 ($0.11) per kWh for 10 January, up by 39% from a year ago, while day-ahead peak-time prices (from 1:00pm to 4:00pm Japan time) reached JPY 13.7 ($0.09) per kWh, 22% higher than a year ago.

Major Japanese power utilities had a total of 1.87 million tonnes (Mt) of LNG on 5 January, which is 13% lower than the five-year average between 2019 and 2023.

Temperatures in Japan will dip below zero degrees in several regions this weekend which will likely strengthen downstream consumption.

However, buying interests from Japanese importers remain limited as major importers have bought in advance.

Europe

The front-month(February) Dutch Title Transfer Facility (TTF) prices briefly touched $15 per MMBtu on 2 January but has gradually tapered off in the second week of January.

The TTF spread between March and April has been narrowing significantly since the end of last year, flipping from a backwardation to a mild contango on 7 January.

Norwegian pipeline flows fell 1% week-on-week at approximately 329 million cubic meters per day (MMcmd) on 8 January and is 5% lower year-on-year.

Snohvit’s restart date was extended by 10 days to 19 January compared to the initial estimated restart date of 10 January, following a trip on 2 January.

This may provide support for prices and could incentivize additional LNG to be pulled into Europe.

So far, Europe has imported 3.2 Mt of LNG this year, of which 63% or 2 Mt was of US origin.

We expect most US LNG cargoes to flow into Europe as arbitrage economics remain more favorable for Europe delivery compared to Asia delivery.

US

Henry Hub prices traded sideways over the past week at approximately $3.6 per MMBtu on 8 January.

Forecasts for the East remain below average until 17 January, except for 11 January, while South Central region forecasts below-average temperatures until 16 January.

The Pacific region is expecting above-average temperatures until 12 January but is also forecasting changes to below-average temperatures from 13-21 January.

Feedgas delivery to US LNG projects remains robust, up by 0.4% week-on-week at around 14.6 billion cubic feet per day (Bcfd) on 7 January.

As of 7 January, approximately 2.4 Mt of LNG have left US LNG projects this year.