Gas Prices Continue Decline, But Risks Still Evident

High storage levels as the end of winter and the heating season approaches continue to weigh on natural gas prices. The market remains aware though of continued risks from tensions in the Middle East and rerouting of vessels around southern Africa. European LNG fell 1.2% to be down 6.5% this month and 12.8% in the year to date.

• European LNG rose to a high of EUR 28.93 on Wednesday driven by disrupted Norwegian flows before falling to EUR 28.26. A compressor malfunction has resulted in outages at Norway’s Troll field, which continue to be extended, and the field to produce lower-than-usual levels, according to Bloomberg. The timeframe for the disruption is not known.
• The problems at Troll and upcoming colder weather are unlikely to impact LNG prices materially as European storage levels remain above seasonal averages, despite LNG imports easing at the start of February.
• US natural gas prices fell 2% to be down over 6% this month as the market expects a significantly lower-than-average inventory drawdown in data due today as the winter remains mild. The key $2 level was cleared during NY trading and prices are currently around $1.967. Temperatures are expected to fall though from the Midwest to the South over February 17-21, according to Maxar.
• North Asian prices are little changed as activity winds down ahead of the Chinese Lunar New Year holiday starting at the end of the week.