Donald Trump’s election adds a new layer of uncertainty to gas markets as the new year approaches.
Here is Rystad Energy’s gas and LNG market update from vice president, Kaushal Ramesh:
“Initial market reactions have been muted to Trump’s election victory, but in the medium term, he is expected to reinforce the US’ role as a leading oil and LNG exporter.
For now, reactionary weather preparedness measures are driving market movement through year’s end, leaving 2025 still up in the air.”
The gas market has not been much affected by last week’s US election results, with the European TTF price posting a marginal decrease from $12.9 to $12.8 per million British thermal units (MMBtu), and the Asian spot price inching up from $12.9/MMBtu to $13.2/MMBtu.
Near-term demand fundamentals remain net bearish overall as more severe winter weather in the Northern Hemisphere, and the related gas demand, has yet to materialize.
However, there is significant uncertainty ahead towards the first quarter of 2025:
- South American LNG demand due to drought conditions
- Egyptian LNG demand due to insufficient domestic production
- Possible escalation of conflicts in the Middle East
- Extensions to transit volume agreements in Ukraine
Europe
Norwegian pipeline supplies are nearly unchanged week-on-week at 335 million cubic meters per day (MMcmd).
Although minor unplanned outages may briefly drive prices, the supply profile is materially stronger year-on-year: Norway delivered 9.8 Bcm in October this year, up from 9.3 Bcm in October 2023.
Russian supplies declined to around 91 MMcmd, although this figure is subject to speculation over whether supplies through the Ukraine transit route will continue past 2024. The market has priced in that they will not, and an eventual deal to continue the transit will therefore exert bearish pressure on the TTF.
European LNG imports rose 17% month-on-month, likely for pre-winter restocking, but are still 16% down year-on-year, reflecting weaker demand as a result of strong renewables generation this year.
Industrial gas consumption appears to be on a slow path to recovery with a 4% gain y/y in October.
However, overall Eurozone manufacturing is still in contractionary territory, although the contraction is slowing.
This winter is widely expected to be at least as cold as last year.
Storage levels were 94.5% full as of 5 November, lower than 99.7% level on the same day last year.
Asia
Temperatures have trended above seasonal averages in Japan and South Korea but have dipped to the seasonal average in parts of China, with possible cold snaps ahead in China and South Korea.
Japan’s LNG inventory likely ended October at under 5 million tonnes, which is lower than this time last year.
Inventories are high in South Korea, while underground storage in China is understood to be well-stocked.
The delayed restart of Japan’s 825 MW Onagawa 2 nuclear reactor is not expected to affect winter power supplies as it was not part of the supply planning basis for the December to February period.
Train 1 at the Ichthys LNG facility in Australia is anticipated to return to full production by mid-November.
Any delays to its ramp-up would exert bullish pressure on prices given the inventory situation in Japan.
In China, the National Bureau of Statistics’ Purchasing Managers Index (PMI) returned to expansionary territory in October and sentiment has turned cautiously optimistic due to ongoing and new stimulus measures.
However, as before, we will need to see sustained expansions before concluding that this is a bullish signal for gas demand.
US
Henry Hub prices have declined marginally week-on-week to around $2.7/MMBtu due to forecasts of mild weather, which is expected to curtail heating demand in November.
Dry gas production rose 0.5% year-on-year in October to 104.5 billion cubic feet per day.
Production flexibility has kept the Henry Hub price rangebound in the $2-3 per MMBtu band this year and further upside is limited until new structural sources of demand – LNG plants – become operational.
LNG feedgas intake averaged 13.2 Bcfd on 5 November, largely unchanged year-on-year.
The market is watching for the impact of the late-season Hurricane Rafael, which has led to pre-emptive evacuation of some oil and gas platforms in the Gulf of Mexico.
The supply impact of this is negligible, however, as only 1.6 % of US gas production comes from the Gulf of Mexico.
