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Bearish Drivers

· Continued soft residential and gas for power consumption and demand destruction.
· Strong production in Norway, particularly, considering possibly Troll’s maximized output exceeding its 40.5bcm quota for this gas year.
· Regional border flow weakness.
· Robust storage refilling trajectory.

Bullish Drivers

· Unplanned LNG maintenance at exporting terminals limiting global supply.
· Norwegian maintenance extensions or unplanned events.

June started the month on a bullish note due to an unplanned outage at Nyhamna, resulting in a 6% price increase. However, this gain was reversed once the outage was resolved, reflecting market nervousness with low storage levels and supply uncertainties. The contract is averaging €34.51/MWh, higher than last year’s €28.99/MWh, despite similar storage levels at 72% fullness. Similarly, NBP saw a bullish start due to the Nyhamna outage, which halted flows into the UK and additional unplanned outages affecting domestic production. Despite this, high UK LNG stocks and stable storage levels kept the system well-supplied. Asian spot LNG prices have been rising throughout June, reaching levels last seen in December 2023. This increase is driven by high heating demand in India, rising temperatures in Northeast Asia, and outages in Australia.

The expectation in July is that markets continue to trade stably with some bearishness. On the demand side, total Northwest European (NWE) consumption is expected to remain flat compared to last year. Weaker demand from Local Distribution Zones (LDZ) and gas for power is anticipated, but this will be offset by increased industrial gas usage.

On the supply side, Norwegian production is projected to be the main driver, with piped exports expected to rise to 322 million cubic meters per day (mcm/d), an increase of 30 mcm/d from last July. This is due to minimal planned maintenance and potentially maximized production at the Troll field. The UK may also increase exports to the Continent via IUK and BBL due to a loose market, with 48 mcm/d booked capacity for these flows.

However, LNG sendout is expected to drop by 554 GWh/d from last year due to higher Asian demand and open arbitrage to Asia, resulting in a month-on-month decrease of 251 GWh/d in NWE sendouts. Despite a slightly tighter balance, storage refilling targets are expected to be met, with storage levels projected to reach 480 TWh (85% fullness) by the end of July, compared to 491 TWh at the same time last year.

Short-term risks include potential unplanned maintenance in Norway, the UK, and LNG infrastructure, as well as geopolitical risks from Ukraine and the Middle East, and uncertainty around Russian flows into Austria. These factors could increase market nervousness and impact supply and prices.

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