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LNG: Supply Risks Drive Prices Higher As European Heating Season Approaches

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Gas prices were stronger on Monday but still down on the month in Europe and Asia. European LNG rose 5.1% to EUR 36.19, close to the intraday high, but is down around 9% in September. Growing tensions between Israel and Hezbollah have increased the risks to oil and gas supplies in the region being disrupted given Iran’s support of Hezbollah. Iran has said though that it will aid de-escalation if Israel does too. 

  • Israel has its own gas supplies and also exports to Egypt, who has been a purchaser on global markets recently. Also, Qatar relies on the Strait of Hormuz, which Iran can block, for its LNG exports.
  • In terms of direct supplies to Europe, fighting in Russia’s Kursk province remains intense as it attempts to regain control of it. Also, unplanned outages in Norway have added to the reduction in flows from scheduled maintenance.
  • Colder weather forecasts are also supporting European LNG with below-average temperatures expected into the start of October in western and central Europe, the onset of the heating season, according to Maxar Technologies.
  • European storage levels are elevated and ahead of schedule, while industrial demand is likely to stay soft with the preliminary September manufacturing PMI indicating that the pace of contraction in the sector increased.
  • US natural gas rose 8.3% to $2.64, the highest since late June, as another storm is expected to impact output. The Gulf of Mexico is preparing with Shell reducing production at its Appomattox facility. Prices are now up 24% this month and approaching overbought levels.
  • North Asian prices followed Europe higher rising 2.1% to be down 6.4% this month. Malaysian LNG exports continue to resume after an outage though, and some buyers in the region are delaying purchases due to higher prices.
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Gas prices were stronger on Monday but still down on the month in Europe and Asia. European LNG rose 5.1% to EUR 36.19, close to the intraday high, but is down around 9% in September. Growing tensions between Israel and Hezbollah have increased the risks to oil and gas supplies in the region being disrupted given Iran’s support of Hezbollah. Iran has said though that it will aid de-escalation if Israel does too. 

  • Israel has its own gas supplies and also exports to Egypt, who has been a purchaser on global markets recently. Also, Qatar relies on the Strait of Hormuz, which Iran can block, for its LNG exports.
  • In terms of direct supplies to Europe, fighting in Russia’s Kursk province remains intense as it attempts to regain control of it. Also, unplanned outages in Norway have added to the reduction in flows from scheduled maintenance.
  • Colder weather forecasts are also supporting European LNG with below-average temperatures expected into the start of October in western and central Europe, the onset of the heating season, according to Maxar Technologies.
  • European storage levels are elevated and ahead of schedule, while industrial demand is likely to stay soft with the preliminary September manufacturing PMI indicating that the pace of contraction in the sector increased.
  • US natural gas rose 8.3% to $2.64, the highest since late June, as another storm is expected to impact output. The Gulf of Mexico is preparing with Shell reducing production at its Appomattox facility. Prices are now up 24% this month and approaching overbought levels.
  • North Asian prices followed Europe higher rising 2.1% to be down 6.4% this month. Malaysian LNG exports continue to resume after an outage though, and some buyers in the region are delaying purchases due to higher prices.