Euro TTF spikes to 2024 highs on Russia gas supply threat
Quantum Commodity Intelligence – European natural gas prices consolidated at this week's yearly highs Friday, as heightened tensions on the Russia-Ukraine border again highlighted Europe's continued reliance on Russian gas supplies.
The rally comes on the potential of a supply crunch during the peak demand season, which could leave Europe vulnerable in the event of a sustained cold snap this coming winter.
Front-month Sep24 TTF futures were trading above €40/MWh mid-afternoon Friday, with prices up around 15% since the start of the month and topping the previous 2024 highs of €38/MWh.
"European gas benchmark futures rallied amid fears of disruption to Russian gas crossing Ukraine. This follows reports of Ukrainian troops seizing a key gas transit point near Sudzha, Russia," commented ANZ commodity strategist Daniel Hynes, noting the station is part of the last remaining link bringing piped Russian gas to Europe via Ukraine.
Up until Thursday gas flows via Ukraine were normal, according to nominations published by the Ukrainian grid, but data Friday suggested throughputs were slowing down.
The pipeline can supply Europe with 5% of its gas needs and is critical during times of high demand when Europe's gas infrastructure faces major constraints.
However, European gas tanks are currently more than 86% full – a record for this time of year – so for now, the spike is more pricing in a heightened risk premium, said analysts.
"If these (Sudzha) reports turn out to be true, it increases the risk that we see a more sudden stop in Russian pipeline flows via Ukraine," commented Warren Patterson, head of ING's commodity research.
Patterson added that the market is already bracing itself for a stop to these flows at the end of the year when Gazprom's transit deal with Ukraine expires, "but the potential to lose this supply even earlier would be a shock to the system".
Asia
Potential supply disruptions to Europe have also helped boost LNG prices in Asia this week, which had been leading the firmer trend in recent weeks as buyers stock up in time for winter fuel requirements.
Oct24 and Nov24 Japan-Korea Marker (JKM) futures have comfortably moved above $14/mmBtu, while winter contracts have consolidated above $15/mmBtu.
Equivalent European LNG prices were nearing $13/mmBtu for Oct24, while winter-contract prices were around $14/mmbtu.
US prices were also off lows on the potential for increased export demand with the Sep24 Henry Hub contract on NYMEX trading at $2.16/mmBtu mid-morning Eastern Time Friday, having dipped below the psychologically important $2/mmBtu level earlier in the month.
