Following further concerns over reduced Russian gas supplies, the Dutch TTF gas future gained again settling at $38.96 per MMBtu for July contracts primarily due to less supplies from both Russia and Norway.
The gas supplies from Nord Stream have maintained stable with the level of 63 million cubic meters per day (mcm/d) on 21 June but still lower than the normal level of about 150 mcm/d since Gazprom announced that they have not received the turbine that was sent to Canada for maintenance within due time.
There is still an uncertainty over how long Nord Stream 1 supplies will be capped, but the scheduled 10-day maintenance work for Nord Stream 1 from 11 July, which will account for a supply loss of approximately 600 million cubic meters, will further tighten the European gas market during the summer.
Meanwhile,Norwegian gas pipeline operator Gassco reported that Norwegian gas exit nominations on 22 June will continue to decline to 286.5 mcm/d due to the planned annual infrastructure maintenance related to Ormen Lange and Troll gas fields.
Most of the maintenance work will be completed by the end of June, so we expect that the Norwegian gas supplies to Europe would soon recover back to the range between 300 and 310 mcm/d.
After the announcement of reversing policies to burn less coal in the German, Austrian and Netherland power sectors due to lower Russian gas supplies, more discussions, and decisions on measures to address the European energy crisis are expected.
The European Commission stated that Europe shall stay focused on massive investment in renewables and long-term drive to cut fossil fuel use while the IEA warns the possibility of the full-stop of Russian gas supplies this winter, greatly risking gas storage targets this year, never mind the pain that will come this winter should this happen.
For the first five months of 2022, total coal-fired power generation in Germany has jumped about 20% (or 11.3 TWh) to 70 TWh with a decrease of 16% (or 4 TWh) for power from gas compared to previous year.
The Netherlands has experienced a drop of 21 % (or 3.6 TWh) in gas-fired power generation to 13.3 TWh this year and coal-fired power generation also decreased 13% to 7 TWh.
For Austria, very little electricity from coal is produced at just 0.36 TWh from January to May but the gas-fired generation increased notably to 5.8 TWh this year, which is 24% (or 1.1 TWh) higher than previous year.
Among these three countries, Germany has more flexibility in fuel-switching, and we expect that 10 Gigawatt of coal-fired capacity is estimated to be brought back to the market and this may provide about additional 26 TWh electricity from coal in 2022 to compensate the loss power generation from gas.
Meanwhile, Venture Global has signed the first US-Germany LNG deal.
The duration of this deal is 20 years, and first cargo delivery is estimated to start in 2026.
Henry hub gas future have slightly decreased settling at $6.808 per MMBtu for July contracts on 21 June though the first LNG deal was signed between US exporter Venture global and German EnBW company.
This deal would enable a total of 1.5 million tonnes per annum (MTPA) LNG supplies from Venture Global to EnBW, where 0.75 MPTA supplies from Plaquemines LNG terminal and another 0.75 MPTA from the CP2 LNG terminal.
Currently, the US LNG exports to Europe this year have already reached about 23 million tonnes for the first five months, and we expect that the total US LNG export to the world will see a historical high level of 85 million tonnes in 2022 though Freeport LNG will be out of service during the summer and become partially operational after September 2022.
Asian LNG demand slightly recovered with the JKM futures settling at $37.32 per MMBtu on 21 June but few buyers are looking for prompt LNG deliveries in the near term due to higher price offers from European buyers.
The domestic gas demand of China is still relatively weak, but some improvements have been seen compared to early June with more economical activities.
Higher-than-normal weather is projected for most areas of Japan and some provinces of China, and this would partially indicate more gas demand in power generation sector to meet cooling demand and explain the strong price support for spot LNG deals and JKM futures as well.