Liquefied natural gas (LNG) producers are preparing to cover winter demand in Europe, but buyers must brace for higher prices, according to movements on the reference digital exchange TTF and delivery data.
Natural gas prices on the TTF briefly touched a two-year high last week, at €49.03 per megawatt hour, as low temperatures spurred demand.
In today’s trading, a megawatt for delivery in one month stood at around €48 just after noon and was nearly ten euros more expensive than at the beginning of the month, approaching levels from nearly a year ago, according to official data from the key gas exchange in the European Union.
The lowest price this year for futures contract buyers on the TTF was paid on February 23, at just €28.8 per megawatt hour.
Since mid-September, gas prices have risen nearly 40 percent due to fears that Europe will lose the remaining supplies arriving via pipelines or will receive significantly less.
About two weeks ago, Austrian OMV decided to deduct the compensation awarded to it in an arbitration dispute against Russian Gazprom for irregular deliveries in September 2022 from its financial obligations. The Russian company responded by suspending deliveries, and a spokesperson for the Russian Ministry of Foreign Affairs reminded of the explosion on the Nord Stream 2 pipeline and the suspension of transit through the Yamal-Europe pipeline.
Supply from Russia
Russian gas continues to arrive in Austria, but OMV is now purchasing it on the exchange and through intermediaries, explains the news agency APA.
Concerns about supply have also been fueled by U.S. sanctions against Russian Gazprombank. The Kremlin stated that it views the sanctions as an attempt to disrupt the remaining Russian gas supplies to Europe and announced “proportional countermeasures,” according to spokesperson Dmitry Peskov.
Supply from Russia could also be reduced by the expiration of the transit contract through Ukraine at the end of the year.
Global liquefied natural gas producers are preparing to cover the ‘gaps’, and LNG imports into Europe could reach the highest level since February in November, at 9.16 million metric tons, according to the commodity market tracking company Kpler.
This would represent an increase of just over 21 percent compared to October and as much as 44 percent compared to September, when it had dropped to the lowest level in three years.
Supply has primarily been boosted by gas producers in the United States, the world’s largest LNG exporter and a key supplier, with estimates suggesting that Europe will import 4.32 million tons of American LNG in November, the highest since February and nearly 40 percent more than in October, according to Kpler data.
Asian imports of American LNG, on the other hand, are expected to decrease by as much as 31.8 percent in November compared to October, to just 2.19 million tons, primarily due to weak imports from India, Pakistan, and Bangladesh.
India is the fourth largest buyer in Asia, and in November it is expected to import 2.21 million tons, 6.4 percent less than in October, as it falls into the group of price-sensitive buyers, and the price increase is likely to curb its demand, notes Reuters columnist Clyde Russell.
