Russia At Centre Of Recent Developments

Natural gas prices are higher on the week with European and Asian prices rising on Wednesday. European LNG rose 2.1% to EUR 35.29 after a high of EUR 36.04 to be 5.7% higher this week.

• European prices rose after an international court decision to award Germany’s Uniper damages from Gazprom for unsupplied gas, as other European countries have still received Russian supplies. For instance, Austria still receives around 80% of its shipments from Russia’s Gazprom. Thus, if the Russian energy producer doesn’t pay, which seems possible, Austria could be liable. These developments increase the risk to Europe’s gas supplies. Other cases are yet to be decided.
• There have been disruptions in Libyan gas flows to Italy, and there are unplanned outages in Norway and Australia’s Wheatstone facility.
• Increased US sanctions on Russia that target goods sold to them will impact its LNG projects. US treasury secretary Yellen said “we are increasing the risk for financial institutions dealing with Russia’s war economy and eliminating paths for evasion, and diminishing Russia’s ability to benefit from access to foreign technology, equipment, software, and IT services”, according to Bloomberg.
• US natural gas fell 2.8% on Wednesday to $3.04 after rising sharply on Tuesday. The sell-off was driven by profit taking. It is now up 4.2% this week and 17.6% in June to date. EIA gas inventory data for last week is released today and Bloomberg consensus expects a 76 bcf increase.
• US gas prices could rise further over the summer as cooling demand rises. Forecasts are signalling that a lot of the US will experience higher-than-average temperatures going into late June.
• North Asian prices rose almost 5% yesterday to be up over 8% this week driven by stronger demand.