Weak winds supporting EU gas prices despite partial thaw; Gazprom requests 35.8 mcm for transit via Ukraine
MOSCOW. Feb 16 (Interfax) - Spot gas prices in Europe are rising despite a notable increase in temperatures because of weak wind generation, though the winds and the market situation could change as soon as today.
UKRAINIAN TRANSIT
The Gas Transport System Operator of Ukraine, or GTSOU, has accepted a booking from Gazprom today to transport 35.8 million cubic meters of gas through the country, the same as the previous day, data from the GTSOU show.
Capacity was requested only through one of two entry points into Ukraine's Gas Transport System, the Sudzha metering station. A request was not accepted through the Sokhranovka metering station.
"Gazprom is supplying Russian gas for transit through the territory of Ukraine at the volume confirmed by the Ukraine side via the Sudzha metering station at 35.8 mcm on February 16, with booking via the Sokhranovka metering station declined," Gazprom spokesman Sergei Kupriyanov told reporters.
The GTSOU has declared a force majeure with respect to acceptance of gas for transit through Sokhranovka, claiming that it cannot control the Novopskov compressor station. The route through Sokhranovka had provided transit of more than 30 mcm of gas per day.
Gazprom believes that there are no grounds for the force majeure or obstacles to continuing operations as before.
EUROPEAN MARKET
The sharp decline in wind-turbine production continues on the continent. Wind turbines provided only 15% of the region's electricity needs last week, falling to 8.4% on Wednesday, which was the lowest level since December 6, according to WindEurope, though the forecast calls for increased winds in the region starting today, thus an increase wind generation.
The day-ahead contract for today at the Dutch TTF gas hub in the Netherlands closed at $605 per thousand cubic meters.
The "Asian premium", or the spread between gas prices in Asia and LNG prices in Europe, is steady. In Asia, the most expensive futures contract for March on the JKM Platts index is $638 per thousand cubic meters, and futures under the LNG North-West Europe Marker are $580 per thousand cubic meters.
EUROPEAN INVENTORIES
Current inventory levels in Europe's underground gas storage (UGS) facilities have declined to 65.22%, which is 20 percentage points above the average for the same date over the past five years, according to Gas Infrastructure Europe.
Inventories contracted 0.45 percentage point during the gas day for February 14.
The relatively mild weather in October, November and January, in addition to the continent's austerity measures, have resulted in the level of reserves in UGS facilities being at an all-time high for this time of year since monitoring began, thereby underpinning the authorities' confidence in getting through the winter in good shape.
European LNG terminals operated at 62% capacity in January, and have averaged nearly the same in February.
The level of LNG reserves in tanks at receiving terminals has been reducing greatly, implying that the inflow of new LNG shipments to the region is falling amid low prices and competition from Asia.
Germany has opened a second terminal for receiving LNG on the Baltic coast. A terminal at Lubmin has joined the facility in Wilhelmshaven, and the launch of a floating storage regasification unit in Brunsbuttel is being prepared.
U.S. INVENTORIES
The state of gas in UGS facilities in the United States is of increasing importance for the global market, and the country is actively increasing gas exports, primarily to Europe.
Reserves decreased 6.1 billion cubic meters for the latest reporting week ending February 3, 2023, with weekly offtake exceeding the five-year average for the first time since the beginning of the year.
The current level of inventories is around 49%, which is five percentage points higher than the average figure for the past five years, according to the U.S. Energy Department's Energy Information Administration.
Cold weather is forecast in the U.S. for February, which should result in increased energy costs for heating and increased gas consumption. On the other hand, Freeport LNG, the country's largest LNG plant, is still postponing restart following an accident, and gas remains on the domestic market that has been expected to be exported.
The EIA currently expects UGS stocks to drop by 60 bcm this winter to the average for the last five years. Natural gas volumes in storage facilities should total 40 bcm by the end of March, which would be 8% below the average for five years.
