Key data trends

In November, the nymex henry hub natural gas (NG) futures settlement price showed an upward trend. As of November 30, the nymex henry hub natural gas (NG) futures settlement price was $3.363 per million British thermal units, an increase of $0.656 per million British thermal units compared to the previous period (October 31), with a growth rate of 24.23%.

Dutch natural gas (TTF) futures prices showed an upward trend, with the end-of-month price at $14.713 per million British thermal units, up $1.747 per million British thermal units compared to the previous period (October 31), with a growth rate of 13.47%.

For china, the national average LNG receiving price is 4,676 yuan/ton, down 8.1% month-on-month, and down 14.72% year-on-year.

Looking ahead to December, the markets in the three regions are influenced by different factors, particularly in europe, where the uncertainty of natural gas supply may lead to a potential shortage in the LNG market.

1. Global hotspots review

1.1 USA market

Bullish

On November 12, news reported that due to the impact of the post-tropical cyclone Rafael, over 10% of the oil and 3% of the natural gas production in the U.S. Gulf of Mexico remains shut down.

On November 21, news reported that Indonesia's upstream oil and gas regulator SKK Migas announced the interruption of bp plc's Tangguh liquefied natural gas business. SKK Migas spokesperson Hudi Suryodipuro mentioned that the Tangguh LNG Train 3 began interruption on November 16 and is expected to resume normal operations by November 25.

On November 21, news reported that Freeport LNG on Thursday indicated to state environmental regulators in a report that one of the three liquefaction production lines at the Texas LNG export facility was shut down on the 20th.

bearish

In the early hours of the 6th local time, U.S. Republican presidential candidate and former President Trump delivered a speech at the Palm Beach Conference Center in Florida, announcing that victory in the 2024 presidential election may lead to changes in the Biden administration's LNG export permit restrictions.

1.2 Europe Market

Bullish

On November 24, news reported that Iraq's Ministry of Electricity announced on Sunday that due to maintenance activities, Iran's gas supply to Iraq has completely ceased, affecting Baghdad, central provinces, and the mid-Euphrates region, resulting in a loss of 5.5 gigawatts (GW) to the national grid, affecting a total of 15 days.

2. The escalation of the conflict between Israel and Palestine has increased speculation about a shortage of henry hub natural gas supply.

3. Gazprom will suspend gas supplies to Austria according to contract starting from November 16, 2024, at 6:00 AM Central European Time, reducing the supply to zero.

bearish

1. The temperature drop in the region is below expectations, leading to weaker downstream demand in the henry hub natural gas market.

1.2 China market

Bullish

1. On November 26, a spokesperson for Woodside Energy stated that the company safely shut down the Pluto liquefied natural gas facility on the 25th due to an unexpected event that is under investigation.

bearish

1. The stock at the regional receiving station remains high, and consumption is relatively slow, which may affect future shipping capacity.

2. The temperature drop was less than expected, and there was no significant boost in overall market demand, leading upstream to actively offload.

2. November Market Analysis

2.1 International Henry Hub Natural Gas Fundamental Analysis

Price

In November, the nymex henry hub natural gas (NG) futures settlement price showed an upward trend. As of November 30, the nymex henry hub natural gas (NG) futures settlement price was $3.363 per million British thermal units, an increase of $0.656 per million British thermal units compared to the previous period (October 31), with a growth rate of 24.23%.

The main reasons for the increase in the settlement price of US henry hub natural gas (NG) futures are the continued impact of hurricanes in the USA in November and the maintenance of some LNG export facilities, which led to delays in LNG shipments and drove prices up.

Dutch natural gas (TTF) futures prices showed an upward trend, with the end-of-month price at $14.713 per million British thermal units, up $1.747 per million British thermal units compared to the previous period (October 31), with a growth rate of 13.47%.

In November, the gas supply from Russia's western pipeline decreased again, and with the tensions in the Middle East escalating, market speculation was high. However, due to europe's inventory still maintaining at over 85%, the supply of henry hub natural gas remains quite sufficient, and TTF futures prices stabilized after an upward movement.

Supply and demand

In November, the global LNG market saw an increase in supply, with a total export of 35.459 million tons, up 1.98% month-on-month; total imports of LNG reached 33.274 million tons, a decrease of 1.06% compared to October.

On the supply side, LNG exports from Oceania significantly decreased, with November's exports dropping by 4.14%, totaling 7.432 million tons. This was due to weak import demand for LNG in east asia, which led to a reduction in Oceania's exports, while LNG exports to the americas and asia increased significantly, mainly driven by the boost in europe's LNG import demand.

On the consumer side, europe's LNG import demand increased, with November's LNG imports rising by 18.94% month-on-month. Asia's LNG import demand overall decreased in November, with imports dropping by 6.5% month-on-month.

Inventory

As of the week ending November 22, according to the report from the us energy information administration, the USA's henry hub natural gas inventory was 3,967 billion cubic feet, down 2 billion cubic feet or 0.05% from the previous week; the inventory level is 134 billion cubic feet higher than the same period last year, with an increase of 3.50%. It is also 267 billion cubic feet higher than the five-year historical average, with an increase of 7.20%.

As of the week ending November 22, according to the data from the european gas infrastructure association, europe's natural gas inventory was 3,578.8 billion cubic feet, down 120.3 billion cubic feet or 3.25% from the previous week; the inventory level is 373 billion cubic feet lower than the same period last year, with a decrease of 9.44%.

2.2 Fundamental analysis of the China market

Price

In November, the average price of LNG in domestic main production areas was 4,245 yuan/ton, falling by 10.14% compared to the previous month and down by 7.64% year-on-year; the national average price for LNG delivery was 4,676 yuan/ton, down by 8.10% month-on-month and down by 14.72% year-on-year. The price in November in domestic main production areas showed a downward trend compared to October.

During the early part of November, the liquid levels at main production area factories were generally high, with limited downstream demand boosting prices, leading factories to lower prices to clear inventory. As liquid levels decreased, and due to a rise in the average auction price of raw gas from PetroChina in November compared to October, factories pushed up prices to alleviate the situation of profit inversion. In the later period, due to limited demand boosting prices and sufficient domestic supply, factories reduced prices to stimulate sales in order to keep inventory at a reasonable level. Overall, the prices in November for main production areas declined compared to October. The national LNG delivery price in November also decreased compared to October. November marks the start of the heating season, but due to limited temperature drops, downstream demand was weak, resulting in a slight lack of vigor in terminal deliveries, thus market delivery prices fell along with factory prices. Although market prices rebounded slightly with factory price increases later, they still did not recover the total drop. Overall, the national LNG delivery price in November decreased significantly compared to October.

Supply and demand

In November 2024, the domestic LNG consumption volume reached 3.479 million tons, an increase of 4.04% month-on-month. In the first half of the month, before heating commenced, certain cities purchased LNG at low prices; in the latter half of the month, with lower temperatures in the north, there was a slight increase in coal transportation demand, driving an increase in demand for transportation fuel; thus, the overall downstream demand in November increased, leading to a rise in apparent LNG consumption compared to October.

In November, the domestic LNG shipment volume was 2.2445 million tons, an increase of 1.36% month-on-month. The supply of upstream gas resources was adequate, leading to improved factory capacity utilization and significant shipment pressure. Additionally, in the early part of the month, factory prices consistently decreased, attracting downstream customers to purchase at low prices; later in the month, prices rebounded after reaching a low point, with a bullish sentiment among downstream buyers, resulting in smooth overall shipments from factories. Therefore, the total shipment volume of domestic LNG in November increased compared to October.

In November, the LNG shipment volume at receiving stations was 1.2345 million tons, an increase of 9.3% month-on-month. This month, new receiving stations in the South China region, namely Guangdong Energy in Huizhou and Huaying in Chaozhou, increased the overall shipment volume at receiving stations.

On November 29, 2024, the LNG plant inventory was 0.6682 million tons, an increase of 12.59% compared to the end of last month. The average inventory this month was 0.6255 million tons, an increase of 15.77% compared to last month. In November, upstream supply of henry hub natural gas was ample, temperatures were higher than the same period in previous years, LNG production was sufficient, and the downstream demand increased only slightly, resulting in a significant rise in plant inventory.

Profit.

In November 2024, the average theoretical production profit of the Inner Mongolia LNG plant was -919 yuan/ton, a decrease of 737 yuan/ton compared to the previous month. This month, the cost of gas sources from PetroChina in Inner Mongolia was 2.67-3.33 yuan/cubic meter, an increase of 0.21 yuan/cubic meter compared to the average price last month. The average production cost of 9 sampled plants from Longzhong was 5267 yuan/ton, an increase of 6.38% compared to the previous month. In November, while production costs at the plant increased, market prices were affected by snowfall and sluggish downstream demand, leading upstream suppliers to actively lower prices, resulting in reduced profits.

3. Reference Cases

3.1 Theoretical Hedge Analysis of Natural Gas Futures

If the purchaser buys a cargo of LNG spot based on the settlement price of henry hub (NG) natural gas futures for about 3.5 million million BTUs on October 31, without hedging, the purchaser will make a profit of 2,296,000 USD at the delivery on November 30.

If hedging by selling short positions with henry hub (NG) or mini henry hub (MNG) natural gas futures contracts, it would avoid risks associated with physical price fluctuations. The net value of one NG futures contract is -6560 USD, while the net value of one MNG futures contract is -656 USD.

Note: This case only shows the difference in positions between NG and MNG futures under hypothetical conditions and how to theoretically hedge, and does not have practical operational significance. Please refer to it with caution.

MNG is more suitable for smaller buyers or investors due to its small trading unit and low margin requirements.

3.2 China Market Sentiment Research

Supporting factors: In December, temperatures in the northern regions continue to drop, and LNG market demand may increase, leading to higher prices.

Put factors: This winter, there is a sufficient supply of natural gas, and the decrease in temperature has limited impact on boosting the LNG market, keeping prices stable for now.

4. December Market Outlook

Price

In December, upstream gas volume decreases and LNG production declines. With falling temperatures, transportation demand for coal may increase, slightly boosting the automotive market in December. LNG prices are expected to rise; however, due to abundant inventories in LNG plants, overall supply is relatively loose. Demand from downstream city gas increases, but with sufficient previous reserves, the enthusiasm for terminal purchases is lacking. The price advantage of LNG compared to pipeline gas is recovering, but some industrial users in the south have ceased operations for holidays, making it difficult to boost industrial demand.

Henry Hub natural gas futures prices (NG) are expected to show a downward trend followed by a slight upward trend. Uncertainties in European natural gas supply still exist, and Europe may seek more LNG imports to ensure natural gas supply within the region. Overall demand in Asia remains stable without significant changes, which has a negligible impact on Henry Hub natural gas futures prices. It is expected that Henry Hub natural gas futures prices (NG) will show a slight upward trend.

Temperature.

According to the GEFS model forecast, the overall temperature in the USA from the 8th to the 12th is expected to rise slightly, with a noticeable increase in temperature except in the Gulf of Mexico region, while the temperature in the southern regions will remain stable.

Currently, the overall temperature in Eurasia in December is trending downwards, which may boost LNG import demand. The temperature drop in Europe is quite significant, which may greatly impact US LNG export prices.

Statement

This report is for the exclusive use of shandong longzhong information technology co., ltd. (longzhong news) clients. Reproduction, copying, or dissemination in any form without authorization from longzhong news is strictly prohibited. If cited or published, the source must be credited to longzhong news, and any modifications or misinterpretation of this report's original intent are not allowed.

The information contained in this report consists of public information or research materials obtained legally, which longzhong news believes to be credible. Longzhong news strives, but does not guarantee the accuracy and completeness of the information contained. The content of this report is for client reference only and does not constitute any final operational advice on investment, legal, accounting, or taxation matters. Any investment decisions made by anyone based on this report are unrelated to longzhong news and the authors of this report.

If there are any doubts regarding this report, please contact us via email at pengt oilchem.net, and we will respond promptly.