European gas extends losses amid easing demand, ample LNG supply
EUROPEAN natural gas prices declined for a fifth day, with traders weighing muted demand against risks to supplies from top provider Russia.
The market has calmed significantly in recent days as consumption has eased with the onset of summer amid ample supply of liquefied natural gas (LNG). Disputes over Moscow's demand to be ultimately paid in roubles for its pipeline volumes by converting foreign currency through Gazprombank JSC seem to be over for now.
While flows to some buyers that refused to comply with the system were halted, Gazprom PJSC is unlikely to impose further cuts for the time being, according to people familiar with the situation.
The easing payment issue is "another monkey off our back", said Tim Partridge, head of energy trading at DB Group Europe. "Intensive users Germany and France are working banks' forex 2-transaction exchange method, appeasing Moscow, for now."
With ample LNG imports, European storage sites are now almost 50 per cent full, within a 5-year average for the time of the year, data from GIE show. Storage facilities are likely to be full by the end of summer, barring any significant disruption to Russian supplies, analysts at BloombergNEF said in a research note. Inventories, which had reached critically low levels when last winter started, must be built in time for the next heating season.
"Clearly volatility will remain with any news quickly resulting in a change of direction," said Nick Campbell, a director at Inspired. "However, with supply relatively robust and demand remaining tepid alongside increasing storage fullness, then currently it is driving the softness."
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Still, Russian shipments to Germany through the Nord Stream pipeline fell further on Tuesday (Jun 7) after slipping over the weekend. Also, supplies from Germany to Poland dropped to zero at the start of the day, according to grid data. Russian exporter Gazprom said its meeting confirmed requests from buyers in full, including via the Nord Stream link.
At the same time, supplies from Norway have edged lower. While the country resumed LNG deliveries from its Hammerfest plant after about 2 years, maintenance at a number of facilities including the giant Troll field have cut the nation's supply capacity this week. Reductions are set to peak on Wednesday.
Dutch front-month gas, the European benchmark, declined as much as 4.6 per cent and settled 3.6 per cent lower at 79.608 euros (S$117) a megawatt-hour. The UK equivalent contract fell 9.5 per cent to 136.29 pence a therm. European power prices followed gas downwards, with German year-ahead power dropping 1.8 per cent to 243 euros per megawatt-hour at the close.
Still, there's a risk that a demand recovery in China amid easing lockdowns - coupled with stockpiling in Japan and South Korea - "could trouble Europe", according to BloombergNEF. "Imports to Northwest Europe in June could fall from May levels as the netback premium to send LNG to Europe rather than Asia declines." BLOOMBERG
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