Page 17 - FSUOGM Week 32

FSUOGM PERFORMANCE FSUOGM

Gas prices in the US, Europe

spike on hot weather

EUROPE GAS prices in the US and Europe rose sharply thirds of the US LNG capacity.”
on the hot weather in the first week of August. In the last few days of trading, anticipated
Hot weather has given US and European gas prices have risen by 22% to heatwaves in both Europe and the US have
demand some support. 33% respectively, but still remain low compared helped push up gas prices sharply in both
to past prices, reports BCS Global Markets. regions, helped by a reported rise in flows to
A huge gas glut on the international markets LNG facilities in the US, maintenance outages
and oversupply of LNG is capping prices, which in Norway and increased flows to Ukrainian
have this year fallen to record lows. At their best storage.
LNG prices only rose to a high of $3 per mmcf European gas traders have more than quad-
($107 per mcm) this week, still a fraction of pre- rupled the volume of natural gas they store in
vious highs. western Ukraine’s underground reservoirs,
The weather-related spike in gas prices has reports Ukrtransgaz. Offshore companies have
lifted Gazprom’s stock price by 5% this week parked 5.3bn cubic metres under a customs
and brought forward seasonal increases by a warehouse regime that allows them to store gas
few weeks. But analysts warn that the gas market duty free, paying only rent.
remains woefully oversupplied. As Europe’s gas reservoirs fill up with cheap
Gazprom and Ukraine’s Naftogaz stock- gas, the number of companies storing gas in
piled large amounts of gas last winter ahead Ukraine has jumped to 68 today, from 28 this
of an anticipated breakdown of a transit deal time last year.
that was eventually signed at the last minute. Ukrtransgaz has 11 underground gas storage
Russia was expected to cut Ukraine off from facilities with a total capacity of 31 bcm – equal
transit gas that would have led to shortages to the total storage capacity of Italy, France, Hun-
in Europe. Both companies built up large gary and Austria combined.
reserves for this eventuality, but when a new The spike in gas prices is from a low base.
deal was done they found themselves with a Gazprom’s portfolio sales (including pricing
surfeit. An exceptionally warm winter and links to spot, futures and oil markets) have
now hot summer only exacerbated the prob- been giving the company actual realised prices
lem of supply. And rising supplies of LNG of c$100/mcm this summer, reports BCS GM,
have made it worse. and so these increases alone will not move the
“Due to the combination of the 2nd LNG needle much. The company is still only getting
glut and the [coronavirus] COVID-19 crisis, the just above its accounting breakeven level of an
global gas market is badly oversupplied, lead- estimated c$90/mcm.
ing to gas prices being pushed as low as $1.1/ Gas prices were already expected to rise to
mmcf in Europe (c$40/mcm) in May,” BCS GM this level in September on a seasonal basis, and
reports. “A modest recovery to c$1.8/mmcf ($64/ to c$4.5/mmcf ($160/mcm) in mid-winter, says
mcm) in July was helped by the shut-in of two BCS GM. ™

Week 32 12•August•2020 www. NEWSBASE .com P17