European TTF gas prices surge 25% on day, futures trading €120/MWh

5 Oct 2021

Quantum Commodity Intelligence - Benchmark TTF European natural gas futures surged to fresh record highs of around €120/MWh Tuesday, a gain of almost 25% on the previous close of around €97/MWh for the near months, as fears of the winter energy crunch drove values ever higher.

Prices have more than doubled in less than a month and quadrupled since mid-June when TTF prices initially reached all-time highs of around €30/MWh.

According to exchange data, the front four months (Nov 21 to Dec 22) were all trading above €120/MWh during the late afternoon in Europe.

Record low seasonal gas storage levels in Europe, steep competition from Asia and uncertainty over much-needed Russian supplies via the Nord Stream 2 gas pipeline have all added to the gas supply crunch, say analysts.

Goldman Sachs warned last month "the European gas market is displaying signs of a supply crunch and extreme physical tightness," noting stocks had swung from a record storage surplus one year ago to record low inventories currently, as the continent failed to attract adequate supply from abroad.

In particular, Europe is regularly outbid by Asia LNG buyers, particularly China, who has been busy stocking up on supplies ahead of winter.

"Ship tracking data shows that [China is] already beating rivals in Europe over available cargo, with September deliveries up 20% year-on-year. It is now poised to overtake Japan as the biggest importing country," said Daniel Hynes, senior commodity strategist at ANZ, noting November futures prices for the JKM benchmark hit fresh highs of over $35/mmBtu on Monday (around €120/MWh).

Nord Stream 2

Europe is in desperate need of some relief from additional Russian gas via Nord Stream 2, although there are uncertainties on when the project can deliver much-needed gas to Europe.

The Nord Stream 2 pipeline operator said Monday it had begun filling the pipeline with gas.

"The gas-in procedure for the first string of the Nord Stream 2 pipeline has started," Nord Stream 2 AG said in a statement.

"This string will be gradually filled to build the required inventory and pressure as a prerequisite for the later technical tests," said the Switzerland-based company, owned by a subsidiary of Russian gas giant Gazprom.

It said it would publish more information about "further technical steps in due time."

Moscow has said that it is waiting for Nord Stream 2 to come online before delivering more gas but said the pipeline would help combat surging gas prices in Europe. 

Running from Russia's Baltic coast to northeastern Germany, the underwater, 1,200-kilometer (745-mile) pipeline follows the same route as Nord Stream 1, completed over a decade ago.

Like its twin, Nord Stream 2 will be able to pipe 55 billion cubic meters of gas per year to Europe, increasing the continent's access to relatively cheap natural gas at a time of falling domestic production.