US strike pauses eases risk premium as heat hits Europe and Asia.
Europe
Over the weekend, President Trump called off planned military strikes and claimed a deal framework with Iran was emerging.
Iran subsequently denied that direct negotiations were taking place, which underscores the continued headline risk.
Fundamentally, however, a prolonged heatwave across Europe has lifted cooling demand and tightened regional power balances, while temperatures of up to 6°C above normal are expected across southern Europe in the coming days.
In Hungary, the Paks nuclear power plant was taken offline over the weekend after cooling-water levels from the Danube River fell to their lowest in more than four decades.
The plant normally supplies around 40% of the country’s electricity. Authorities have introduced measures to reduce peak-hour electricity consumption, including work-from-home orders for public employees.
The nuclear outage should provide additional support to gas-fired generation while temperatures remain elevated.
European storage reached 57% on Monday 3 August, up 1.7 percentage points week-on-week but around 12 percentage points below last year’s levels.
Europe’s LNG imports also fell 29% year-on-year to 6.4 million tonnes in July, with stronger withdrawals and weak injection rates keeping inventories below last year’s levels.
Supply risks to Europe remain elevated amid reduced LNG availability from the Middle East.
Additionally, unplanned maintenance at Nyhamna, Oseberg Lange and Dvalin has collectively removed around 37.1 million cubic meters per day (MMcmd) of Norwegian pipeline gas capacity, with the outages expected to continue into late September and early October.
Elsewhere, a drone strike at Egypt’s Damietta port late last week damaged the 3.4-million-tonnes-per-annum (Mtpa) Energos Winter floating storage and regasification unit (FSRU) and the 155,000-cubic-meter (m³) GasLog Salem floating storage unit (FSU), leaving both vessels unavailable.
The disruption effectively reduces Egypt’s direct LNG import nameplate capacity to around 1.4 million tonnes per month, based on the continued operation of the FSRUs Energos Eskimo, Energos Power and Hoegh Galleon.
This capacity falls below Egypt’s July LNG imports of nearly 1.6 million tonnes, capping Egypt’s regasification capacity and flexibility at a time when LNG imports are particularly important for meeting summer gas demand.
No party has claimed responsibility for the incident at Damietta, while the full extent of the damage and the timeline for the vessels’ return to service remain unclear.
In the meantime, Egypt and Jordan appear to be continuing an LNG-sharing agreement under which cargoes imported through the Port of Aqaba are transported to Egypt via the Arab Gas Pipeline.
The newly installed Excelerate Acadia FSRU in Jordan received its first cargo in July.
Asia
The East Asian LNG price for October delivery edged up 0.4% week-on-week to $20.4 per MMBtu on Monday 3 August as geopolitical risk and extreme heat continued to support spot demand.
Japan and South Korea face a 60% to 70% probability of above-average temperatures in August, raising the prospect of faster inventory drawdowns and additional near-term procurement.
Buying interest has broadened despite prices holding near the $20-per-MMBtu mark.
Bangladesh is seeking three August cargoes following the return of the Excellence LNG FSRU after a fire-related shutdown in mid-July, while India, Thailand and Taiwan (China) are also in the market.
In Japan, the restart of Chugoku Electric’s 820-megawatt Shimane 2 nuclear reactor has been delayed from 6 August to 19 August.
The extended outage should increase reliance on gas-fired generation during the heatwave and could add to utilities’ LNG requirements.
In southern China, heavy rainfall following a typhoon in Guangdong province has lowered temperatures and boosted hydropower output.
This should reduce cooling demand and limit gas-fired generation, tempering the broader regional tightening.
US
Henry Hub remained broadly flat over the past week, edging up 0.3% to $2.77 per MMBtu by Monday 3 August, as hotter weather and rising power-sector demand offset strong supply and weaker LNG feedgas consumption.
US gas supply increased to an average of 119.1 billion cubic feet per day (Bcfd) between 24 and 30 July, up from 117.9 Bcfd the previous week.
Demand also rose – from 110.5 Bcfd to 111.8 Bcfd – driven primarily by gas-for-power consumption, which increased from 46.9 Bcfd to 47.3 Bcfd as warmer conditions lifted cooling demand.
Nevertheless, the stronger production backdrop kept the domestic balance comfortable.
LNG feedgas demand eased to 17 Bcfd on 2 August from 17.3 Bcfd a week earlier, leaving more gas available in the domestic market.
Storage reached 3,084 billion cubic feet (Bcf) as of 24 July following a 28-Bcf weekly injection, with robust supply continuing to support inventory builds.
Hotter weather forecasts could strengthen cooling-related gas demand in the week ahead and provide some upside support to Henry Hub.
However, ample production, continued storage injections and softer feedgas demand should limit the scale of any price response.
Meanwhile, the commissioning of Mexico’s ECA LNG project has been delayed again, despite the facility exporting its first cargo on 8 July, after damage was identified during subsequent operations.
