TTF (Title Switch Facility) pure fuel costs have collapsed because the third quarter of 2022.
That’s what analysts at BofA World Analysis said in a report despatched to Rigzone on July 6, including that volatility has spiked “with costs doubling after which falling 30 % in June”.
“Since peaking in 2H22, world fuel costs moved considerably decrease, with heat winter climate and comfortable demand serving to drive TTF costs from a excessive of EUR 340/MWh in late August 2022 to a low of EUR 23/MWh in early June, the bottom ranges since early 2021,” the analysts stated within the report.
“By mid-June, TTF costs greater than doubled to EUR 49/MWh on information that the ~80 Mcm/d Nyhamna fuel plant in Norway would keep offline till July 15,” they added.
Nyhamna upkeep, coupled with elevated U.S. LNG upkeep and scorching temperatures that boosted Asian LNG demand, spooked speculators who had been holding quick positions and driving costs decrease, the analysts famous within the report.
“The spike and subsequent crash in costs pushed 30-day volatility as much as 150 from lower than 50 in early June,” the analysts stated within the report.
“TTF is at the moment buying and selling round EUR 34/MWh as we speak [June 5], however the stock trajectory and weak macro backdrop pose draw back threat to costs forward of winter,” the analysts added.
Within the report, the BofA World Analysis analysts highlighted that, of their base case, NWE fuel demand rises 49 MMcm/d yr on yr in 2H23, whereas provide falls 50 MMcm/d, “and storage hits full capability in September, which might steepen the contango within the TTF curve”.
The analysts additionally warned within the report that a number of bullish dangers “might derail storage and push winter TTF … larger”.
“First, shopper fuel and energy costs proceed to retreat, which might deliver again extra value delicate demand than anticipated. Second, whereas we assume regular climate, temperatures might flip extra excessive, particularly on this El-Nino cycle, resulting in larger fuel utilization throughout all sectors,” the BofA World Analysis analysts stated within the report.
“Third, Asian LNG demand, which has tracked -1.2mn mt YoY ytd, might choose up on climate or a stronger financial system. Lastly, extra provide outages might happen in 2H, chipping away at inventories,” they added.
In a fuel and LNG market replace despatched to Rigzone on July 6, Rystad Power Senior Analyst Nikoline Bromander stated fuel storage ranges in Europe are on the high finish of the five-year vary, “placing the area it in a wholesome place going into the second half of the yr”.
“Europe is continuous to inject fuel into storage, with stock ranges effectively above 2021 and 2022 ranges for this time of the yr,” Bromander stated within the replace.
“Storage services are at the moment 77.6 % full at roughly 88 billion cubic meters, effectively positioned to succeed in the 90 % goal earlier than November. The withdrawal price is at the moment round 12 MMcm/d at an injection price of 399 MMcm/d,” the analyst added.
Within the replace, Bromander highlighted that fuel costs on the TTF have fluctuated in latest weeks “in response to deliberate upkeep on the Norwegian Continental Shelf and geopolitical tensions in Russia”.
The analyst added within the replace that “this week Europe is predicted to see above-average temperatures, offering an upside threat to costs and elevated demand from cooling”.
In a separate market observe despatched to Rigzone this week, analysts at Commonplace Chartered highlighted that European pure fuel inventories “are already two billion cubic meters larger than the utmost reached prematurely of the 2021-22 winter … with about three months of builds but to return earlier than seasonal attracts begin”.
“Inventories stood at 89.92 billion cubic meters on July 2, in response to Fuel Infrastructure Europe (GIE) information, every week on week improve of two.102 bcm; inventories are 22.85 bcm larger yr on yr and 18.96 bcm above the five-year common,” the Commonplace Chartered analysts stated within the report.
“The construct over the previous week has been 77.6 % of the five-year common at 300 MMcm/d. If that ratio is maintained by way of to the top of the injection season, inventories will attain an all-time excessive of 115 bcm,” they added.
“The EU fuel stock construct is operating about eight weeks forward of 2022 (the present stock stage was not reached till August 26 final yr). With an all-time stock excessive now wanting very seemingly on the finish of injection season, the EU fuel stock state of affairs is extraordinarily snug in our view,” the analysts went on to state.
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