Market Drivers November 2024
Bearish Drivers
· Increased Norwegian production and stability with minimum maintenances.
· Gas for power returning to more normal levels with higher renewable output.
Bullish Drivers
· Stronger residential demand and possibility of even colder below normal weather to lift demand even higher.
· Middle East geopolitical uncertainty and uncertainty of potential implication of the US sanctions on Gazprom bank.
· NWE storage aggregated inventory are below recent years and our forecast projections of this gap.
· Forecast for LNG arrivals in December to be 40mcm/d lower year on year.
As of 19th November, the ICE TTF DEC24 and NBP DEC24 contracts have surged nearly into a bull market, with respective gains of 16% and 15% since early November, driven by heightened demand due to wintry conditions and exceptionally low renewable output, particularly wind generation. Both markets reached new yearly highs on 15th November, reflecting tighter balances, increased withdrawals from storages, and geopolitical tensions playing a minor role. NBP has seen a growing premium to its TTF counterparts, while JKM prices also rose, largely tracking European price movements, although Asian LNG demand remains subdued with robust storage levels.
NBP and European gas markets have traded bullishly this month, reaching new yearly highs in spot and near-curve contracts. This is driven by a surge in heating demand amid reduced renewable output caused by the rare anticyclonic gloom weather pattern. While the OMV arbitration award and Gazprom’s flow reduction statements added some volatility, gas flows through Ukraine remain largely stable, with other European buyers absorbing OMV-designated volumes. December forecasts show a significant rise in LDZ (local distribution zone) consumption—up 21% year-on-year in Northwest Europe (NWE) and 20% in the UK—due to colder temperatures compared to last year’s mild December.
Gas-for-power demand remains strong but is expected to decline month-on-month due to improved renewable output and a 10 GW year-on-year increase in French nuclear availability. Industrial demand continues to lag, particularly in France and Germany, with only slight increases linked to heating rather than economic recovery. In the UK, total gas consumption is forecasted to rise by 11 mcm/d, driven by heating demand, with supply largely stable compared to December 2023. Increased Norwegian flows will offset reduced LNG imports, although recent diversions from Asia have boosted UK LNG sendout.
On the supply side, Norwegian production is expected to rise month-on-month but fall short of last December’s record levels. LNG sendout in NWE and the UK is forecasted at 203 mcm/d, up 8 mcm/d year-on-year. Storage dynamics are also tighter, with net withdrawals significantly above December 2023 levels, flipping the SUM 25–WIN 25 spread into backwardation. Long-term forecasts remain moderately bullish, anticipating NWE storage levels at 43% fullness by April 2025 under mild demand scenarios, lower than earlier projections.
Risks include potential US sanctions on Gazprom bank, which could disrupt payment mechanisms for Russian gas, and heightened volatility around the likely non-renewal of the Ukraine-Russia gas transit deal. However, most of the weather-driven upside appears already priced into the market.