European natural gas prices continued their upward march this week as an extended outage at Norway’s Ormen Lange gas field compounded an already widening storage gap, while Middle East tensions kept traders on edge across global markets.
The Netherlands-based Title Transfer Facility’s September contract closed at US$20.1 per million British thermal units on August 11, a 6.7 per cent weekly gain.
Analysts caution that any pricing snapshot should be viewed carefully, as gas markets remain highly sensitive to developments out of the Middle East.
Ongoing negotiations between Iran and Oman over oversight of the Strait of Hormuz have done little to calm nerves.
Without direct US involvement in the talks, and with the possibility of new fees threatening maritime freedom, market participants appear increasingly sceptical that the latest diplomatic push will ease tensions.
Adding to Europe’s supply woes, Shell has extended the outage at Norway’s Ormen Lange field, with output reduced by 40 per cent, or roughly 8.9 million cubic metres per day.
The extension is expected to cost Europe the equivalent of 11 to 12 LNG cargoes at a time when the storage gap is widening rather than narrowing.
As of August 11, gas storage across the EU and UK stood at 67.4 billion cubic metres, or 59.12 per cent of total capacity.
The shortfall compared to the same period last year grew to 14.79 billion cubic metres, up from 13.91 billion cubic metres the previous week.
Still, forward curves suggest Europe will begin drawing uncommitted US cargoes starting in October, and the region is already receiving some shipments originally bound for Egypt, which is grappling with the aftermath of a drone strike on its import infrastructure.
Jan-Eric Fahnrich, Senior Analyst for Gas and LNG Research at Rystad Energy, summed up the mood in the firm’s latest market update.
“European and Asian gas markets find themselves in the high-priced part of yet another hope-disillusionment cycle of Middle East negotiation attempts,” he said.
By contrast, he noted: “Only the US market is cushioned, as strong production and limited feedgas pull are keeping seasonal demand in check.”
In Asia, East Asian LNG prices for October delivery rose 4.7 per cent week on week to US$21.69 per MMBtu, trailing Europe’s pace and potentially steering more uncommitted US cargoes toward the Atlantic basin.
Falling LNG freight rates have narrowed the premium Asian buyers must pay relative to Europe, with demand from South Asia remaining particularly strong.
Japan’s nuclear sector faced fresh disruptions, with Chugoku Electric’s Shimane unit 2 pushing its restart to August 17 and Kansai Electric’s Ohi unit 3 offline since August 9 following an alarm trigger.
In Bangladesh, the floating storage and regasification unit Excellence resumed LNG sendout after a fire-related shutdown that lasted from July 22 to August 5.
In the United States, Henry Hub front-month prices rose 3.2 per cent to US$2.77 per MMBtu, still well below the US$3 threshold as strong domestic output continues to outpace demand.
US inventories climbed to 3,117 billion cubic feet after a weekly build that outpaced both last year’s figures and the five-year average, even as power sector gas consumption and LNG feedgas demand both ticked higher.
