INTERVIEW: Germany's Uniper sees 'mixed signals' for winter; to be active in LNG trade in 2030s

Germany's Uniper Global Commodities sees "mixed signals" in the European gas market, with the winter outlook appearing stable but the potential for factors to trigger swings in prices, its chief commercial officer told S&P Global Commodity Insights.

In a recent interview in Singapore, Peter Abdo, Uniper Global Commodities' chief commercial officer of LNG & global origination, also said the company would "absolutely" remain active in the LNG market well into the 2030s.

"There are a lot of mixed market signals in the gas market at the moment. On one hand, the fundamentals currently suggest that stable winter outlook," Abdo said.

"But of course there are so many factors right now which could swing prices," said Abdo, adding that the European gas market "could be bullish if European countries look like they were to miss the February intermediate storage targets, which at this point is unlikely. And of course the ongoing labor disputes in Australia impact sentiment."

Benchmark Dutch TTF prices have been volatile over much of the summer due to extended maintenance work in Norway and the potential for strike action in Australia to increase competition for LNG cargoes between Europe and Asia.

The TTF month-ahead price has ranged from a low of just Eur23.25/MWh in June to a high of Eur43.43/MWh in late August, according to Platts price assessments by S&P Global.

Abdo pointed to Europe's gas storage levels reaching 90% full in August, well ahead of the November target, with Uniper's current gas storage levels standing at roughly 95%.

He added that the weakening in industrial demand across Europe since Russia's invasion of Ukraine last year pointed to a "bearish market", although lower prices could in turn stimulate demand.

On top of that, with the El Nino weather effect in play there is potential for a relatively warm European winter, "then obviously, we have weaker prices," Abdo said, also highligting the Australian strikes among the bullish factors impacting market sentiment.

"One thing for sure, though, is volatility is very high. And I expect volatility to remain to be high in the LNG market for the coming winter for some time," he added.

Over the next several years to 2026, Uniper expects the European gas market to be "fairly balanced" outside of any market surprises, he said.

"Beyond that, we see quite a bit of supply coming on to the market," Abdo said, describing the outlook as "very healthy."

"We would probably expect that the market should be able to absorb all of that supply beyond 2026," he added.

LNG trade

Looking further ahead, Uniper expects LNG to play a "very important" role as European gas demand will continue growing well into the 2030s, with the company securing supply contracts covering the next decade, Abdo said.

Last year, Uniper "purchased quite a bit of LNG in the spot market to complement our long-term supply," he said.

"We were able to position a good amount of our Asian LNG through physical swaps because we had a lot of that flexibility in the portfolio."

"So for the short term, we would generally buy from the suppliers directly, either from Asian suppliers who have US LNG, or directly from the producers," he added.

The flexibility in US LNG allows Uniper to bring cargoes to both Europe and Asia, depending on market requirements, Abdo said.

With Europe's proximity, "We have been able to attract TTF prices from the US," he said. "I'd say the majority of the LNG that we transacted last year in Europe was TTF."

Abdo said Uniper had transacted more than 300 LNG cargoes in 2021, comprised by spot and mid-to-long term supply volumes, well ahead of the commencement of new German LNG terminals, the first of which started up at Wilhelmshaven in December 2022.

Of the 356 purchased and sold cargoes, the traded volumes had about a 50-50 ratio for settlement in the same year and following years.

"For the longer term, we're looking for supply contracts certainly out into the 2030s," Abdo said.

Asked whether Uniper views LNG as a long-term solution for its energy security, Abdo said: "I don't know how you can categorize that -- but do I see buying out to 2045? Probably not. Do I see transacting LNG into the 2030s, late 2030s? Absolutely."

"The vast majority of our... trading activity is in the short to medium term," he added. "So spot to 5, 7 years we are very active."