LNG

July 3 (LNGJ) - Supplies of regasified LNG delivered from the European network of import terminals to the European Union’s gas pipelines system declined by 14.2 percent in the first six months of 2024 compared with the same period last year to around 58.5 billion cubic metres.

   The delivered volumes also dropped by 32 percent in June compared with May 2024. According to gas industry data LNG imports have provided 36 percent of Europe’s natural gas needs this year so far up until the end of June.

European natural gas prices and US Gulf Coast last day futures for free-on-board cargoes from Louisiana and Texas increased for a second day after the Iranian drone and missile attacks on Israel brought more uncertainty and volatility into oil and gas markets.

European liquefied natural gas price benchmarks and Asian spot cargo margins dropped to under $1 per million British thermal units as over-supply compared with the past two-and-a-half years and mild weather offset global shipping security and navigation issues from Suez to Panama.

European spot natural gas prices followed futures prices lower to marks last seen in June 2021 just before energy security concerns entered the market and at least seven liquefied natural gas cargoes were heading for the UK even as the differentials widened in favour of Asian spot cargo values.

North Asian spot LNG cargo prices fell on the week while European wholesale natural gas values also declined as full storage in the southern European Union nations of Spain and Italy and mild seasonal weather in Northwest Europe eased geopolitical supply concerns.

Equinor, the Norwegian energy company and the main pipeline natural gas supplier to the UK and the European Union, has brought online the world’s largest offshore wind farm as part of a joint venture development.

Global natural gas and LNG prices were largely unaffected by Russia’s political and military unrest over the weekend as Russian oil and natural gas values have already been largely discounted by sanctions and the shutdown of the Nord Stream gas pipelines to Europe.

The European Union Agency for the Cooperation of Energy Regulators (ACER), the body chosen to impose price controls on the natural gas market in the 27-nation EU and replace the benchmark Dutch Title Transfer Facility (TTF) LNG benchmark with its own cargo prices, has issued its first daily gas market correction mechanism (MCM) reference price.

“EU regulations have established a gas MCM to protect against excessively high prices,” explained ACER.

The EU agency said that its MCM reference price was an average of several indexes and marker prices related to liquefied natural gas price trends.

ACER has the authority to calculate and monitor this MCM reference price for the activation of the MCM if need be from February 15 and to publish the MCM reference price on its website every weekday.

However, ACER noted that the price on 1 February 2023 was well under the MCM activation level.

The EU body said its natural gas market price for February 1 was €55.21 euros per megawatt hour, or equivalent to about $17.65 per million British thermal units, meaning that the MCM did not need to be activated.

This ACER price was also less than the prevailing Dutch TTF close on the day which was equivalent to $18.60 per MMBtu.

Under EU price control rules, the MCM is only activated if the front-month TTF derivative settlement price exceeds €180 per megawatt hour, or about $57.50 per MMBtu, for three consecutive working days, and is at least €35 above the MCM reference price for the same period of time.

ACER is also tasked with providing regular daily prices before launching the new European benchmark LNG spot prices at the end of March.

These EU cargo prices would replace the Dutch TTF gas hub price for LNG cargo values.

The TTF was criticised by the European Commission, the EU executive body, for being a “highly volatile” price system in 2022 after Russia cut off pipeline gas deliveries to Europe.

The plan of the EU regulators is to publish a daily delivered ex-ship (DES) price for spot cargoes for North-West Europe (NWE) in euros and in the form of megawatt hours.

LNG cargo prices

EU officials will additionally publish a DES LNG spot cargo price for South Europe, covering nations like Italy and Spain, as well as DES spread data between Northwest Europe and South Europe prices

Intercontinental Exchange, the leading global provider of market platforms for energy futures and options, said it intended to implement the EU”s MCM Regulation and related price cap on Dutch TTF, though it is also planning a London-based TTF trading alternative.

ICE’s Endex, based in the Netherlands and operator of the world’s most liquid trading venue for TTF natural gas futures and options, plans to change its Rulebook to promote compliance with the MCM Regulation, effective February 15, 2023.

“Once the MCM Regulation enters into force, the Rules of ICE Endex will forbid market participants from submitting orders to the exchange order book in TTF derivatives above the price cap when the correction mechanism is activated, unless clients are eligible to make use of the exemptions granted in the Regulation,” explained ICE.

“Therefore, ICE is preparing to launch a parallel market for TTF futures and options contracts on its London-based exchange ICE Futures Europe from February 20, 2023, subject to completion of relevant regulatory processes,” said ICE.

“This will provide market participants with optionality in the event the natural gas price rises, and the risk of the MCM price cap being triggered increases,” said ICE.

European natural gas and LNG prices dropped by another 9.5 percent on the week as gas storage levels were high in Europe and energy demand in North Asia was seen gaining to underpin the Japan-Korea Marker price for spot cargoes.

European natural gas prices and LNG values dropped a further 16 percent this week amid mild winter weather and the Japan-Korea Marker for spot cargoes also declined, though at a slower pace and widened the gap to over $4.70 per MMBtu with Europe’s benchmark gas price as Germany was poised to receive regular LNG shipments.