Gas Prices Stronger On Continued Geopolitical Tensions & Fundamentals Shift

LNG prices fell in January but rallied on the last day of the month. European LNG rose 2.1% to EUR 30.20 on Wednesday to be 6.8% lower over the month. It reached an intraday high of EUR 31.22 early in the session. The move to EUR 30 was driven by a deterioration in the Middle East situation but cooler weather and other supply disruptions may drive prices higher in February.

• Europe is supplied by tankers that usually come through the Suez Canal but more of them are now travelling around southern Africa delaying shipments. Bloomberg is reporting that there are signs there will be lower European LNG imports this month. But European storage levels remain above the seasonal average, which has put a ceiling on European LNG prices.
• Europe is forecast to see colder weather though in the second half of February at a time of outages in Norway and the UK.
• US natural gas prices rose 2.7% on Wednesday to finish January down 8.3%.
• Republicans have said that they will bring the Biden administration’s plans to freeze LNG export approvals, which is set to significantly delay numerous projects, to a vote in the House in February. Approvals will now be assessed for how the shipments impact climate change. Republicans may make support for funds for Ukraine and Israel dependent on the reversal of this policy.
• US President Biden has said that a response to the killing of 3 soldiers by Iran-backed rebels has been decided but the oil & gas markets are waiting for the reaction. He said that he did not want an escalation of conflict in the region or a war with Iran. Iran has also called for calm.
• North Asian gas prices were slightly higher yesterday but fell over 17% last month. The fall in prices has attracted interest in the market.