Gas geopolitical considerations in Europe spread to the North African coast, while Lithuania becomes the first country in Europe to ban Russian gas.
In a sign that gas geopolitical considerations are spreading, Spain has shifted support to Morocco’s view for autonomy in western Sahara, reversing a 46-year-old policy that supported Algeria.
Algeria was responsible for supplying 16% of total demand in Spain in 2021.
Alegria and Spain have a long-term contract that is not linked to spot LNG prices.
It is unlikely that flows will be affected in the short-term, but Algeria has not ruled out a price renegotiation in the future.
In terms of fundamentals, Norwegian gas flows remain stable while Russian flows reduced 10 MMcmd from last week.
Power prices in France halved on Friday due to warmer weather, increase in nuclear production and a high renewable supply in Germany.
Markets were however calm down Monday as rubles payment and buyers’ positions remain at an impasse.
Russia expects to receive payments of gas delivered from April 1 in rubles and since the first payments are likely to happen in late April, the market is not yet properly pricing in a supply disruption due to non-compliance with Russia’s demand for ruble payments.
European countries have not updated the market on how their companies are acting in response to Russian currency demands.
Once the governments have a public position, it is up to buyers to notify Gazprom on how they intend to proceed.
Germany will nationalize a unit of Gazprom Germania from now until September 30.
The nationalization was in response to Gazprom leaving its German subsidiary without German government approval.
Gazprom operates substantial storage facilities in Germany and the German energy regulator is required to step in as an operator and shareholder to guarantee gas supply security.
Germany continues to operate within the existing legal framework in their relationship with Gazprom.
The possibility of further sanctions on Russia is gaining ground as the brutality of the occupation comes to fore.
Indications are that these may still skirt around the jugular of Russian energy exports.
Lithuania has become the first European country to stop imports of Russian gas and will replace it by using the aptly named Hoegh Independence regasification facility at Klaipeda.
Lithuania has a 6 MMcmd demand, and Russian imports were about 50% of total supply in 2021.
To block Russian gas, Lithuania will need to have signed short term contracts in the past that are expiring soon and/or no long-term contract signed with Russia, as buyers usually have penalties if they unilaterally stop purchases.
Asian buyers are holding LNG prices close to U$ 35/MMBtu as they have limited interest in higher priced supply.
This behavior sustains a position of discount in Asia over European prices.
In Asia LNG tanker Oceanic Breeze is signaling for Prelude FLNG arrival at end of April, suggesting the facility could start up sometime in May.
This may help ease regional balances going into the shoulder season.
Henry Hub prices are above U$ 5.7/MMBtu due to increased demand in lower temperatures and liquefaction utilization remains close to maximum capacity.
By Vinicius Romano
