Gas prices in Europe have crashed through the $2 range discussed in two previous OIES comments. The June TTF monthly price closed below $2 and, for the next few months, the forward curve suggests this will continue. The amount of gas in storage in Europe has played a crucial role in pricing movements, absorbing a lot of the excess LNG supply in 2019....MOREAlso via Global LNG Hub, From Oxford's Institute for Energy Studies, June 2020:
$2 Gas in Europe (Part III):Down, Down, Deeper and Down
Expect the unexpected seems to be an appropriate quote for the current situation in the European gas market, which has been badly hit by the COVID-19 pandemic. Back in October 2019, the Oxford Institute for Energy Studies (OIES) published an Energy Comment1 which considered the possibility of $2 gas in Europe during 2020. By $2 gas it was meant that, at least the average monthly price for TTF or NBP would be below $3 i.e. start with $2 at the beginning ($3 gas is broadly equivalent to €9/MWh and $2 gas to €6/MWh). The Comment was prompted by the filling of European gas storage to historically high utilisation levels by early October2019, and the possibility of a mild winter coupled with a deal on Ukraine transit, leading to gas in storage in Europe at the start of the injection period in April2020, still at relatively high levels. When combined with a further ten percent increase in LNG supply between 2019 and 2020 and weaker demand in the key Asian markets, the Americas and Middle East for LNG imports, this would in all likelihood lead to $2 gas in Europe in Q3 of 2020.....MUCH MORE (16 page PDF)
The mild winter and a deal on transit in Ukraine happened and by the time we reached the end of February2020, $2 gas had arrived much earlier than thought, with the month-ahead index for March for TTF closing at$2.91/MMBtu and for NBP at $2.88/MMBtu.2 Even Asian spot LNG prices dipped below $3 with the ANEA (Argus Northeast Asia spot LNG) month ahead price for March averaging $2.92/MMBtu.3 All this was happening before the real impacts of COVID-19 were felt in the global gas markets, other than in China. These developments prompted OIES to publish a follow up Energy Comment4, which asked the question where all the rapidly rising LNG supply would now go, in the face of collapsing demand. Not all suppliers, whether LNG suppliers, pipeline exporters to Europe or indigenous producers such as Norway, could possibly achieve the same levels as in 2019, especially in the summer months, and as storage fills. The question asked, therefore, was –who will blink first?
This third instalment on $2 gas in Europe looks at the question who has blinked first and how much more supply needs to be taken off the market as the impact on demand of COVID-19 continues.
