RBN Energy

For six months, European natural gas prices skyrocketed higher almost every day. The soaring prices made sense. Gas inventories in Europe were low following higher-than-normal demand last winter. Economies were recovering from COVID-19. Russia was curtailing gas deliveries. It all added up to a likely supply shortage during the winter of 2021-22. And the market did what markets do: anticipate. Even though the next winter season was months away, gas buyers went to work, stocking up on supplies like squirrels gathering nuts. The more prices increased, the more panic buying kicked in. By last Tuesday, October 5, the European TTF price was up more than 5X what it had been on May 1. Then, on Wednesday, a few comments from Vladimir Putin seemed to pop the bubble, and within a few days the Dutch TTF price was down 27%. Is everything OK now? Was the gas-price run-up all just speculative buying and short covering? Or is a supply crunch still on the horizon, and this is just the calm before the storm? In today’s RBN blog, we explore those questions.

Last week, panic over gas availability and energy reliability this winter sent international natural gas and LNG prices above $30/MMBtu for the first time. Asia’s Japan Korea Marker (JKM), Europe’s Dutch Title Transfer Facility (TTF) and the UK National Balancing Point (NBP) once again had multiple days in a row of all-time high settlements, as the undersupplied market struggles to find balance. The global shortage has also impacted the gas-rich U.S. market, which is linked to it through LNG exports. The U.S. markets are tight and might also face undersupply this winter, albeit, probably not to the point of triggering reliability issues that are already emerging abroad. If it did, the U.S. exports nearly 10 Bcf/d of LNG, which could be throttled back to free up additional supplies for domestic use. Nonetheless, Henry Hub prices climbed to nearly $6/MMBtu last week and hit post-2008 record highs. This is by no means the first-time various markets have faced considerable imbalance. In fact, last year at this time we were coming out of a period of widespread oversupply and record-low gas prices. But it’s certainly foreboding that it’s not even winter yet, and prices are skyrocketing to new heights. So the big question on everyone’s mind is how bad could this get? The answer of course is complicated and heavily dependent on weather. In today’s RBN blog, “To the Moon and Back – U.S., International Gas Markets Strap in for Wild Winter Ride,” Lindsay Schneider takes a look at how we got here, how LNG has intertwined the international energy markets more than ever, and what that means for the winter ahead.

The U.S. natural gas market’s exposure to global gas and LNG markets has come into sharp focus in recent days. A gas supply crunch in Europe and scant LNG cargoes have roiled the international markets and kicked competition into overdrive. European natural gas and Asian LNG prices are at record highs and locked in a race to the top. The U.S. gas market has been relatively buffered from the full extent of the panic-driven premiums enveloping European and Asian markets, constrained primarily by its limited ability to help meet international demand. In other words, the U.S.’s LNG export capacity ceiling is likely the only thing reining in Henry Hub prices from following European and Asian gas/LNG prices to the moon. As explosive as Henry Hub futures are these days, if not for the capacity constraint, they would be much higher. That ceiling is about to get a little higher, however, as two liquefaction projects — Cheniere Energy’s Sabine Pass Train 6 and Venture Global’s Calcasieu Pass — get ready to export LNG from U.S. shores this winter, amid what’s already the most bullish Lower 48 gas market in years. In today’s RBN blog, we detail the timing and demand implications of these two projects.