By Anna Koroleva
The cost of gas on world markets was generally neutral last week. But the weekend brought a number of positive news for suppliers, because of which fuel began to rise in price.
The price of gas is stable, but not for long
As a result of the previous week, gas prices in Europe have stabilized. This is due to the fact that the region's underground storage facilities are completely full, as indicated, in particular, by the Prime agency.
However, with the onset of cold weather, the situation can change dramatically. Production in Norway is falling, as are the volumes of supplies of liquefied natural gas (LNG) to the continent. There are also fears that Ukraine may stop providing transit in 2024. In other words, already this winter Europe may find itself in another energy impasse.
It may be recalled that gas in the Old World has been getting cheaper since the end of last year, and at the end of May prices fell even below $300.
That price turned out to be 13 (!) times lower than the peak values of last spring - $3,892 per thousand cubic meters. However, this extreme peak did not last long.
On Monday, August 7, 2023, "blue fuel" went up by 1% compared to the price of last Friday - up to $331 per thousand cubic meters. September (nearest) futures on the TTF index (the largest hub in Europe located in the Netherlands) opened trading at $332.8 (+1.4%). And as of 9:10 Moscow time, their cost was $331.1 (+0.9%). (The dynamics of quotations is based on the settlement price of the previous trading day - $328.2 per thousand cubic meters).
It is likely that the demand for Russian gas in Europe, as well as its prices, will continue to grow. Despite a number of loud statements, the facts speak of a high level of consumption.
Thus, in July, Russia became the second largest supplier of gas to Spain, according to the energy company Enagas. Russia delivered 8,764 gigawatt hours (GWh) of liquefied natural gas, which accounted for 27.6% of all July deliveries to this country. Compared to July 2022, Madrid began to purchase 2,000 GWh more. In total, for the period from August 2022 to July 2023, Russia supplied Spain with 75.5 thousand GWh.
At the end of 2022, Austrian Chancellor Karl Nehammer announced a reduction in dependence on Russian gas from 80% before the Ukrainian conflict to 20%. However, in recent months, the share of Russian gas in Austria's consumption structure has again increased to 60%, and the gas contract will be valid for another 17 years, writes Das Erste.
Meanwhile, in the US, gas futures rose to more than $2.55 a barrel, rebounding from a seven-week low of $2.48 amid strong demand prospects and evidence of supply contraction. Forecasts have extended the expected duration of hotter weather over the next two weeks, especially in Texas, increasing demand for natural gas cooling.
Gas prices may rise to $1,000-1,200
The latest EIA data showed that natural gas reserves in the United States rose by 14 billion cubic meters. ft in the week ended July 28, which is the lowest in four months and below market estimates of 17 bcm. ft.
Gas prices in the EU cannot rebound from annual lows in any way, pressed down by LNG supplies amid moderate consumption, including due to large accumulated reserves in UGS facilities, Igor Galaktionov, an expert on the stock market at BCS Mir Investments, notes.
According to him, as of August 5, UGS occupancy exceeded 87%, which is about 23% higher than the average seasonal level over the past 5 years. The absence of the need for intensive injection of gas into storage reduces gas imports into the EU and keeps prices low. There are risks that UGS gas purchases will drop to zero by September, which will hit prices even more. On the eve of the heating season, spot market quotes may go steadily below $300 per thousand cubic meters, the analyst expects.
In the Asian region, demand remains stable, but also lags behind market expectations, adds Igor Galaktionov. The post-COVID recovery in China has not provided enough momentum to push prices higher as many industrial facilities switched to coal last year and continue to use up stocks of this cheaper fuel for the time being. The same is happening in India. This is a temporary situation, but until the end of 2023 it may remain relevant.
“Based on a combination of factors, we cannot expect a steady rise in prices before the start of the heating season in the fourth quarter. On the contrary, there are risks of a deeper decline in August-September,” the expert says.
And yet, in general, Sergey Chevrychkin, a financial analyst at the Finmir marketplace, points out that the sentiment in the premarket at the beginning of the current trading week is neutral, without strong movements and clear dominance of buyers or sellers. The current price for "blue fuel" as of 9.15 Moscow time at the TTF hub in Europe is $330.32 per thousand cubic meters. m.
The analyst points out that since the beginning of August, natural gas quotes for the nearest futures contract have added 2%. Since the beginning of the second quarter of this year, gas prices have been consolidating, trading in the range of $280-390 per thousand cubic meters. m. The summer period contributes to the reduction of the volatility of the asset. Analysis of the price chart indicates the continuation of the downtrend. There are no signals for a trend change.
The RSI technical indicator at all time intervals signals the absence of oversold and overbought assets. However, says Sergey Chevrychkin, the end of August and the beginning of September may bring surprises: both the growth of the asset's volatility and the increased level of information flow on gas reserves in EU storages. Natural gas quotes are quite seasonally sensitive.
The most favorable for the growth of gas prices, according to the analyst, are the months from October to February (inclusive). He maintains his forecast for the growth of quotations until the end of the year in the region of 1,000-1,200 dollars per thousand cubic meters. from current values, including after testing the support zone of 259-320 dollars per thousand cubic meters. m.
At the moment, pressure on gas prices is exerted by low demand against the backdrop of high levels of stocks in the EU. However, it is necessary to take into account the risks associated with the weather in Europe in the coming winter and the uncertainty with gas supplies, the expert believes. For example, deliveries from Norway are shrinking as maintenance on the Troll gas pipeline limits its capacity.
“It is worth noting the deviations in the gas industry. The cost of LNG delivery is growing, buyers are afraid that by the heating season the number of tankers will have a shortage, which will affect the growth in the cost of "blue fuel", - adds Sergey Chevrychkin.
This article originally appeared in Russian at expert.ru