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Climbing Natural Gas Prices: US May Slash Exports To Europe

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Natural gas prices in the United States hit the highest in 14 years this week, with the Henry Hub benchmark temporarily topping $10 per million British thermal units. And demand is not going down anytime soon.
The United States has emerged as the biggest supplier of natural gas to troubled Europe, as the latter first slipped into a gas crunch after demand outstripped supply last year. Then it slapped seven packages of sanctions against Russia, its main supplier, for its invasion of Ukraine.
U.S. gas, liquefied and transported to the LNG import terminals in Europe, has been instrumental in filling up Europe’s gas storage caverns ahead of schedule. At the same time, it has highlighted Europe’s vulnerability in the gas supply department: it has virtually no alternatives to U.S. gas, and this has pushed its gas bill ten times higher than what European countries normally spend on gas.
The vulnerability was also highlighted by the production outage at Freeport LNG, which supplies about a fifth of U.S. LNG and which has now said it will not restart production before November, as prices continue higher.
“Virtually all of our fundamental and technical indicators continue to flash green lights toward higher price levels,” Ritterbusch & Associates said in a note cited by the Wall Street Journal earlier this week.
The trading firm also said that U.S. natural gas prices could climb further up as well, close to $12 per million British thermal units in the not-too-distant future.
Meanwhile, Reuters reported this week that LNG prices in Europe had hit a record discount to the European benchmark: the TTF hub in the Netherlands where the gas gets delivered. A discount normally sounds like good news, but this time the discount was the result of a sharp surge in TTF prices after Gazprom said it would be shutting down Nord Stream 1 for unplanned maintenance of its one remaining compressor.
Yet, because of the surge in U.S. natural gas exports to Europe, U.S. gas prices have become a lot more vulnerable to various events, too. Just this week, the news about the delay in the Freeport LNG restart pushed U.S. gas prices down by 5 percent. The longer-term outlook, however, remains bullish.
Earlier this year, investment firm, Goehring & Rozencwajg, forecast that U.S. natural gas prices were about to take off after European ones before too long. The reasons for the surge were overall tight gas supply and U.S. producers’ new central role as biggest suppliers to Europe.
Also, Goehring & Rozencwajg predicted U.S. gas production was nearing a plateau.
“Asian and European natural gas prices stand at $35 per mmbtu, versus $8.20 per mmbtu here in the United States. Given the underlying fundamentals that have now developed in US gas markets, we believe prices are about to surge and converge with international prices within the next six months,” Goehring & Rozencwajg said in May.
This week, Asian LNG prices started the week at some $60 per mmBtu, while European prices for October LNG cargos traded at a little over $60 per mmBtu.
This is an almost twofold increase from May, and prices are unlikely to go back down as the race to secure enough gas for the heating season heats up.
This means domestic U.S. gas prices will remain under upward pressure, too, and that will last for a while as well.
Reuters reported this week that U.S. producers of liquefied natural gas had closed contracts for the delivery of some 48 million tons of LNG in total, which would lead to an increase in total LNG exports of as much as 60 percent if all planned new terminals are built.
Meanwhile, because there are not enough LNG export terminals to satisfy current demand, gas inventories in the U.S. are on the decline, and it might turn out yet that Goehring & Rozecwajg were right, despite an uptick in gas production.
“We are beginning to see a lag in storage builds that could lead to a precarious situation during the draw season in the event of a harsher-than-expected winter,” Neal Dingmann, energy equities analyst at Truist Securities, told the Wall Street Journal.
“There is potential for a winter U.S. superspike.”
A superspike in gas prices in the U.S. will be really bad news, and not just for the U.S. itself. Europe literally depends on American liquefied gas as it seeks to sever all trade ties with Russia.
But if gas prices rise too high in the U.S., export curbs may be in order as gas is still widely used in the U.S. for electricity generation, and no one wants voters with sky-high electricity bills ahead of the November midterms. And this means Europe will be left in the ditch with not enough gas to last it through winter. For prices, the sky will be the limit.

By: Irina Slav

Irina Slav for Oilprice.com

 

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NSCDC Parades Five Suspects Over 24,000 Litres Of AGO 

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The Nigeria Security and Civil Defence Corps (NSCDC) last Friday paraded five suspected oil thieves caught with over 24,000 litres of illegally refined Automotive Gasoline Oil (AGO) concealed in sack bags in Rivers State.
Rivers State Commandant of NSCDC, Michael Besong Ogar, while parading the suspects, reiterated that there was no room for illegal oil bunkering activities in Rivers State, warning that perpetrators would be smoked out of their hideouts.
Ogar said the newly-reconstituted anti-vandal team has made successes in the relentless war against vandalism of oil pipelines and illegal dealings in petroleum products through massive arrests and subsequent prosecution of cases in the court.
“The Commandant General, Ahmed Abubakar Audi, has promised that in a short while there would be a drastic reduction and possible eradication of illegal dealings in petroleum products across the nation
“Our major task is to massively arrest oil pipelines vandals and their sponsors as we take the Anti-vandalism war to the enemies’ domain.
“The nation is losing millions of dollars per barrel due to the increase in pipelines vandalism and illegal oil bunkering, but I can assure you that this menace would be a thing of the past because we are fully committed to the mandate of the Corps’ in safeguarding all critical national assets and infrastructures.
“The suspects will be charged for contravening the Anti-sabotage Act, the Petroleum Act and the Miscellaneous offences Act 2004, laws of the Federation.
“They are: Ifegbu Uche ‘m’ aged 42years, Obinna Ogbonna ‘M’ 42years, Emmanuel Smart ‘m’ 19 years, Lawrence Gibson ‘m’ 35years, and Emeka Desmond ‘m’ 35years, who were arrested while conveying about 24,000 litres of illegally refined AGO concealed in sack bags and carefully packed in a Toyota Sequoia with plate number AbujaGWA386GVA; a Volkswagen Bus with Registration Number: Lagos APP 831 XX, which was intercepted at Abuloma Community in Port Harcourt, a Truck DA1700 with number plate KadunaXE653KA impounded at Abonnema Wharf, and a Ford E- 250 intercepted in Etche respectfully.
“We also intercepted and impounded another short white Mercedes truck with unquantified litres of illegally refined AGO along Ozuoba-Rumuigbo axis in Obio/Akpor LGA, Port Harcourt Rivers State.
“We are very excited that the court has resumed session as the suspects would definitely have their time in Court while application for forfeitures of the products and mode of conveyance would be made and proceeds be remitted in the Federal Government coffers,” NSCDC said.

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Eni Decries Production Loss From Bayelsa Gas Pipeline Explosion 

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Eni, the Italian parent company to the Nigerian Agip Oil Company (NAOC), has said the impact of the Ogboinbiri/OB-OB gas pipeline explosion on gas output was significant.
Production data from NAOC shows that the incident cut Agip’s gas exports by 5million standard cubic meters per day.
Media Relations Manager, in charge of African Operations at Eni, Mr Domenico Spins, said the gas leak has been brought under control.
Spins in a statement announced that the incident was caused by sabotage and third-party interference.
“Eni confirms that a third party’s interference hacksaw cut caused a gas leak at the Ogbainbiri-Ob/Ob gas pipeline.
“The line is depressurised and is currently being repaired. Production losses due to the shutdown are important,” Eni stated.
The Director-General of the National Oil Spills Detection and Response Agency (NOSDRA), Dr Idris Musa, who confirmed the pipeline blast, said the agency would lead an investigation into the incident as soon as it is safe to do so.
NOSDRA had also directed NAOC to shut down the oil and gas wells feeding the breached pipeline to extinguish the pressure and pave the way for a Joint Investigative Visit.

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FG Confiscates 20m Litres Of Illegally Refined AGO

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The Federal Government says the continued efforts by security agencies has led to the confiscation of over 20.2million litres of illegally refined Automotive Gasolme Oil (AGO), otherwise known as diesel.
Minister of Information and Culture, Lai Mohammed, disclosed this in Port Harcourt while carrying out an aerial survey of illegal refinery sites and hotspots along the Nembe Creek Trunk Line and the Trans-Niger Pipelines’ right of way on Friday.
Mohammed said over 210 suspects have been arrested in its efforts to combat crude oil theft in the Niger Delta region, lamenting that the activities of vandals and economic saboteurs have severely impacted the country’s crude oil production.
The Minister said over 461,000 litres of Premium Motor Spirit, 843,000 litres of Dual-Purpose Kerosene, and 383,000 barrels of crude oil have also been confiscated.
He said an additional 365 illegal refining sites were destroyed, with about 1,054 refining ovens, 1,210 metal storage tanks, 838 dugout pits, and 346 reservoirs also destroyed.
“Since the post-covid pandemic recovery of crude oil prices, Nigeria has been unable to meet its OPEC Production quota, hurting the Nigerian economy.
“Due to the nefarious activities of vandals, Nigeria has been losing out on producing approximately 700,000 Barrels of oil daily. This volume is split between crude stolen and production deferment (shut-ins) due to legitimate fear of losing substantial volumes in transit.
“Terminal receipts have persistently declined, leading to decisions such as the Force Majure declared at the Bonny Oil and Gas Terminal in March 2022,” he said.
The Minister also disclosed that the NNPC Ltd had set up a new security architecture to serve as a solid response to detect, deter, and respond to the activities of vandals.
He said the security architecture leveraged collaboration between the Upstream operators, Industry Regulators, Government Security Agencies, and Private Security Contractors.
He further said NNPC Ltd.’s Command and Control Centre has been set up for round-the-clock monitoring of petroleum operations and activities within the Nigerian Exclusive Economic Zone.
According to him, all vessel movements within the Nigerian Exclusive Economic Zone as well as all Ship-to-ship activities within the same zone are now monitored.

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