Page 10 - FSUOGM Week 26 2022

FSUOGM PERFORMANCE FSUOGM

An 80% storage level target by Novem- further from today’s purchase price.
ber would be out of sight if this injection rate
continues. Mild respite for the US
Germany has, as a consequence, declared an Henry Hub prices fell to $6.15 per mmBtu
“alarm phase” second stage of its emergency gas as output increases and demand is expected to
plan, aimed at managing supplies and support- taper in the coming weeks.
ing its storage requirement of 90% by December. Following a sweeping heat wave, tempera-
Phase 2 involves Germany restarting old tures in the west and northeast are expected to
coal-fired plants, as well as introducing incen- come back down to near-normal levels, for now,
tives – such as a credit line of €15bn ($15.86bn) reducing the demand for gas for cooling.
– that rely on market fundamentals to cushion Prices are also slipping due to the Freeport
the loss in gas supply. LNG outage and decreased LNG shipments to
The alarm phase announcement stops short, Europe, which is allowing domestic utilities to
however, of allowing utilities to pass on the boost gas storage ahead of the winter months.
prices in full to end consumers. This is good news for US consumers, but bad
Germany has also announced an emer- news for European importers who are already
gency gas auction plan that allows consumers struggling for supply.
with a gas surplus to sell that gas at auction to Current US storage levels are 12.3% lower
be returned into storage, thereby incentivizing than a year ago and are 13.2% lower than the
consumers to save gas. five-year average.
Austria and the Netherlands are setting out
plans to rely more on coal-powered plants, while Asia returns to the back seat for now
France and Italy are likely to follow suit in the LNG prices in Asia continue to track the Euro-
coming days, aided by a slew of measures to pean market, with inter-basin flows from the
manage gas consumption and storage. Atlantic to the Pacific now unfeasible due to the
France is set to incentivize gas storage by pro- premium that the TTF has over Asia-delivered
viding a gas price guarantee for withdrawals. prices.
This would allow companies to withdraw LNG supplies continue to remain healthy in
gas at the same price at which it is stored today, Northeast Asia, giving market players some lee-
regardless of the future price. way to evaluate their options on how to handle
This would reduce the risks borne by gas high LNG prices amidst forecasts projecting a
holders if the future gas price were to fall much hot summer. ™

European gas prices climb amid further

supply disruptions, heat wave

RUSSIA NATURAL gas prices in Europe saw further this month following an explosion. The situa-
growth in the week ending June 24, as a summer tion could only worsen when the Nord Stream
Russia has made heat wave and constraints in Russian and LNG pipeline is also shut down early next month for
significant cuts to gas supply culminated in a further tightening of the maintenance. German Economy Minister Rob-
supply to Europe in market. ert Habeck has said he cannot be sure that Russia
recent months. The July contract at the Dutch TTF hub rose will resume gas flow via the link once the 10-day
from €117.7 ($125)/MWh on June 17 to €120.6/ maintenance cycle is completed, raising the
MWh on June 20, and climbed further to €125.6/ prospect of another surge in prices and ration-
MWh on June 21, €127.2/MWh on June 22 and ing this winter.
€133.3/MWh on June 23. It dropped back to Europe is scrambling to fill up its gas storage
€128.5/MWh on June 24, but had rebounded to facilities in order to get through the coming win-
€131/MWh as of early afternoon on June 27. ter, but recent disruptions in Russian flow have
Russia has made significant reductions in made this more difficult. The EU has instructed
gas supply to Europe in recent months, and member states to fill their storage sites to at least
while it has cited technical difficulties at the 80% capacity by November 1, up from the cur-
compressor station that feeds gas into Nord rent 55.7%.
Stream 2 as the cause of recent disruptions, EU countries are looking at ways of curbing
European politicians have said the cuts are gas use and some including Germany have pro-
politically-motivated. posed restoring coal-fired power generation.
Meanwhile, Europe continues to contend And the European Commission is planning to
with the loss of supply from the Freeport LNG present a proposal in July on how the bloc as a
terminal in Texas, which went offline earlier whole could reduce gas demand. ™

P10 www. NEWSBASE .com Week 25 22•June•2022