International prices fell ~$3 in Europe yesterday following Putin’s announcement to increase gas flows to Europe.
NYMEX prices continue to fall in tandem with those worldwide, dropping around 3% today on top of yesterday’s 45+ cent drop. Higher Russian pipeline gas imports will offset a portion of European LNG demand for gas from the United States and other regions.
As a result, spreads between the Henry Hub and international benchmarks have been dropping (as shown towards the end of the graph below). Spreads that peaked at ~$33/MMBtu have since decreased to ~$20/MMBtu.
Despite the welcome news for Europe, it remains to be seen whether Russia actually does increase their flows – however, even with increased Russian flows, the storage situation remains dire.
European storage remains well below the five-year range, and a slightly-colder than average winter would threaten to exacerbate withdrawals in the winter season and increase both demand and prices for international gas once again.
source: Gelber and Associates
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