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– North West Europe storages forecast to end September at 508TWh (94% full).
– The resolution of the issue between the workers and the Australian LNG terminals that are currently under the threat of industrial action will be a strong bearish driver for prices.
– Demand destruction in industrial sector continues with latest PMI in Europe signalling additional worsening of conditions as manufacturing sectors registered further decreases in July.
– NWE & UK LNG sendout in September is expected to pick up for the first time in four months after consecutive months of decreasing monthly sendouts.
– The offshore Alliance representing workers at Woodside Energy announced on 20 August to strike as early as 2 September if workers’ claims are not resolved by 23 August – any further risk of strike or actual strike will be a major bullish driver for the market.
– Decrease in Norwegian exports month on month.
– Risk of extensions to NCS planned maintenance schedules.
– Seasonally higher LDZ and gas for power demand.
August was supposed to be a stable month for prices and almost as uneventful as July with strong storage injection, priced in Norwegian maintenances, weaker LNG sendout in response to lower demand needs.
Having said this, the news emanating from Australia regarding the possibility of an indefinite strike action among the workers of major LNG terminals owned by Chevron and Woodside Energy on the 9th of August sent shockwaves across the markets, including Europe where both TTF and NBP curves rallied. Although Australia sends its LNG cargoes mainly to Japan, South Korea, and other countries in Asia, these strikes, if realised, can remove some 10% of the global LNG supply. It would prompt Asian buyers to seek replacement for Australian LNG which would inevitably lift competition with European buyers over uncommitted LNG cargoes from elsewhere.
Most other fundamentals are still bearish, EU inventories broke through the 90% threshold on Aug 16 – 2.5 months ahead of the EU-mandated target. NWE LNG sendout has fallen to 1621GWh/d so far this month, down by almost 300GWh/d from July and 240GWh/d lower compared with August 2022, amid weaker arrival schedule and due to less appetite for more cargoes amid bearish consumption and almost full stocks.
As European stocks are getting full, European market participants have turned their eyes to Ukraine where ample available storage capacity again becomes attractive. As a result, European reserve reverse flows to Ukraine from Poland, Hungary & Slovakia increase this month compared with July.
Looking ahead, there is an overall bearish view of price dynamics in September based on the fundamental balance. Yet, some bullish drivers, like Australian LNG strikes or any unplanned extensions/additions to the already heavy Norwegian outage schedule for September can easily override the current bearish fundamental picture.