European LNG and natural gas prices rose slightly over Feb. 19-20 after an announcement that maintenance at the FSRU Toscana LNG terminal, off the Italian coast, would be extended, however, an overall bearish tone remained in both markets.
In the LNG market, Platts, part of S&P Global Commodity Insights, assessed DES East Mediterranean LNG prices at $7.315/MMBtu Feb. 20, up 12.3 cents/MMBtu on the day, marking a 20-cent/MMBtu premium to DES Northwest Europe. Market participants were reporting similar premiums for the Italian market as well.
In the gas market, prices reacted to OTL’s announcement, with the PSV-TTF spread between month-ahead contracts widening, increasing the PSV March-delivery instrument’s premium by 23 euro cents on the day to Eur1.30/MWh Feb. 19. Thereafter, the premium widened further to Eur1.57/MWh Feb. 20, reaching the highest premium for PSV since May 9, 2023, when it stood at Eur1.58/MWh.
Italy’s OLT said on Feb. 19 that the start of maintenance at its 5 billion cu m/year OLT Offshore Toscana LNG facility will be extended by one month, with regasification services suspended from March 1 to Oct. 31, resulting in an extended period of downtime. The maintenance was previously intended to begin in April and end in October.
The maintenance’s extension intensifies supply-side risk in the LNG market, however, the current and expected bearishness in the European LNG market could cushion the impact to a great extent, according to market sources.
“[The OLT maintenance] can lead to some trouble for southeast Europe,” an Atlantic-based trading analyst said. “But summers can sail through without major visible impact.”
Gas prices had previously shifted on Jan. 29, when OLT originally announced the maintenance period that would begin in April. The PSV month-ahead gas contract’s premium to its Dutch TTF counterpart rose to Eur1.05/MWh on Jan. 29 from 87.50 euro cents/MWh the day prior.
A UK-based gas broker expected the PSV premium to strengthen after the announcement on Feb. 19, having seen some buying pressure on the PSV Summer 2024 contract on the day.
Nonetheless, weak fundamentals maintained an overall bearish tone for month-ahead prices in the continent, with PSV following the trend. Platts assessed the hub’s month-ahead price at Eur24.89/MWh on Feb. 19 and at Eur25.41/MWh on Feb. 20, both lower than the assessment of Eur29.345/MWh on Jan. 29.
Supply uncertain amid extended maintenance
The Toscana terminal was expected to see four discharges in March at intervals of eight days, according to the annual unloading and loading schedule published by the company on Jan. 12. It is not immediately clear how the booked slots will be affected over the period of maintenance.
However, market participants said previously that four large companies hold capacity at the terminal, and these players would have to manage their cargoes.
“The cargoes would need to find another destination whereas the regas slots are at risk of being lost or extended beyond maintenance,” the first trading analyst said.
Another trading analyst said capacity holders may have to offload cargoes that were supposed to be delivered at the terminal.
As a result, these players may look for slots elsewhere in Europe or may even sell at the prompt, the second trading analyst added.
Given the current demand dynamics, the market could turn bearish in the prompt period if players were to offload earlier than expected, according to a market source.
Looking at LNG supply, Italy has imported 712,000 mt LNG so far in February, according to S&P Global data Feb. 20. An additional 180,000 mt of LNG is on the water en route to Italy for February delivery, which would bring the total to 893,000 mt.
February imports of LNG are 13.4% lower than January’s total but 3.2% higher than February 2023 total. The on-the-month decline was mostly led by lower imports into the OLT terminal. OLT’s imports account for 16% of the total imports so far in February, compared with a 28% share in January and a 24% share in February 2023.
In gas supply, Italian storage stood at 59.8% of capacity as of Feb. 18, according to Aggregated Gas Storage Inventory data. These levels are enough to sustain the country during winter, however, once the injection season starts in the second quarter, pressure could be felt should fundamentals shift.
Italy’s gas stocks were 3.68%, or 5 TWh, lower than on Feb. 18, 2023. Comparatively, EU-wide gas storage was 1.13% higher on the year as of Feb. 18.
Source: Platts
