Supply risks support natural gas prices in the near term

Norwegian maintenance and supply concerns from conflicts in the Middle East and Ukraine will support near-term natural gas and LNG prices, RBC Capital Markets said in a note on Thursday.

All these factors are moving the “risk barometer up a notch” this summer, the bank said.

Maintenance and unplanned outages in Norway, Europe’s largest natural gas supplier, are the price drivers to watch this summer, according to RBC Capital Markets.

A new wave of planned maintenance is coming in September and could put upward pressure on European as well as global LNG prices as competition for super-cooled fuel cargoes could increase, RBC analysts noted.

Earlier this summer, unplanned outages triggered several increases in benchmark gas prices in Europe.

The Sleipner hub outage in June sent a 10% jump to a six-month high on the Dutch TTF Natural Gas Futures, the benchmark for gas trading in Europe.

The unplanned outages highlighted the vulnerability of Europe that relies on natural gas imports as Norway became Europe’s main gas supplier after Russia’s invasion of Ukraine and a drop in Russian gas exports to the EU.

More recently, the price hit its highest level this year last week amid concerns over a possible shutdown of Russian pipeline deliveries through Ukraine.

Late last week, natural gas flows from Russia to Europe via Ukraine continued despite clashes on the Russian-Ukrainian border near the only gas metering station still sending Russian gas westward into Europe.

Even as tension between Ukraine and Russia escalated with Ukraine’s incursion into Russia’s Kursk region, both sides have signaled that they have no intention of cutting off gas supplies to Europe via Ukraine.

While short-term gas and LNG prices are likely to be supported by supply concerns, the medium to long-term could see more stable prices as a wave of new LNG export projects come to market, RBC said.

From 2025 onwards, a large surge of LNG will drive normalization, the bank noted.

By Charles Kennedy for Oilprice.com

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