European Natural Gas Prices Soar Amid Supply Disruption Fears
Energy analysts expect the recent surge in European natural gas prices to continue in the coming months. On Wednesday, futures jumped almost 40%, driven by concerns over a possible supply disruption in Australia.
The front-month gas price at the Dutch Title Transfer Facility (TTF) hub, a benchmark for natural gas trading in Europe, reached its highest level since mid-June. It briefly rose to over 43 euros ($47.4) per megawatt hour before declining, and is currently trading at 37.4 euros.
In the U.S., gas futures for September delivery on the New York Mercantile Exchange also rose significantly, reflecting their best performance since mid-June and the highest closing price since early March.
The price surge was triggered by news of a potential strike at major liquefied natural gas (LNG) facilities in Australia. Workers are demanding higher pay and improved job security, which could disrupt approximately half of Australia’s LNG export capacity.
According to Zongqiang Luo, a gas analyst at energy consultancy Rystad Energy, the strike would impact LNG supplies during ongoing heatwaves, despite ample gas inventories in Europe. Luo added that many Asian buyers, such as China and Japan, might seek alternative sources for their LNG cargoes.
Looking ahead, analysts anticipate a continued bullish outlook for gas prices due to reduced LNG imports to Europe, planned maintenance for Norwegian pipelines, and continued heatwaves in multiple regions globally.
‘Possibility of a Shortfall’
For Europe, the surge in gas prices coincides with efforts to reduce reliance on Russian fossil fuel exports following the Kremlin’s invasion of Ukraine. Although countries like Germany have secured large gas deals with other nations, there remains a possibility of a supply shortfall and a need to purchase at spot prices as seen in 2022.
Analyst John Evans from brokerage PVM highlighted that Australia has become the highest exporter of LNG, surpassing Qatar and the US. However, production issues and compromised gas fields have raised concerns among European buyers about supply security, leading to increased tank filling from the cash market before winter.
In addition, the extension of a force majeure declared in Nigeria last year has added to the tightness in the LNG market, as fields struggle to regain production after heavy flooding.
Despite these factors, there are currently no major disruptions in the energy sector that could halt the gas price rally.
