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European gas prices may rise amid depleted storage, supply concerns

Oil&Gas Materials 6 January 2022 11:38 (UTC +04:00)
European gas prices may rise amid depleted storage, supply concerns

BAKU, Azerbaijan, Jan.6

By Leman Zeynalova – Trend:

Gas prices may find support in depleted European storage and continued concerns over supplies from Russia, Trend quoted Rystad Energy’s Senior Analyst Wei Xiong as saying.

“European gas markets experienced much volatility over the holiday season, with the TTF price collapsing to $22/Mmbtu following a dramatic holiday selloff. However, sticking with the theme of volatility that has characterized much of the global markets in recent months, it has already bounced back to around $30/Mmbtu,” he said.

Wei Xiong believes that the rebound is primarily due to weather forecasts that suggest European temperatures will trend at normal levels in the coming weeks, a downward revision to prior expectations of warmer than average weather and a bullish signal for the TTF.

“Making matters worse, the Germany - Poland section of the Yamal-Europe pipeline has now been operating in net reverse mode for 16 days straight. Nevertheless, robust LNG imports into Europe, estimated to be around 7.3 million tonnes in December 2021, have partially offset the rapid depletion of storage, at least for the time being. The ongoing geopolitical strife between Russia and Ukraine creates an overhang on Nord Stream 2, creating the potential for continued weak flows from Russia into Western Europe through much of 2022, and by extension, the potential for continued elevated prices,” noted the analyst.

In the US, the Henry Hub is back to sub $4/Mmbtu levels, with storage marginally above average for this time of year.

“Weather forecasts are trending warmer than usual, but some volatility is expected as sporadic cold snaps may raise gas demand for heating, with some states having already experienced deep freezes and power outages earlier in the week. Temperatures are expected to trend at or above normal in the coming weeks, and barring any unexpected shift, Asian buyers should be able to sail past peak winter without a repeat of last year’s fiasco,” he said.

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Follow the author on Twitter: @Lyaman_Zeyn

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