TTF gas rallies on heightened risk after Nord Stream 'sabotage'

28 Sep 2022

Quantum Commodity Intelligence - European natural gas prices rallied Wednesday after leaks on the Nord Stream 1 and 2 pipelines created fresh supply fears ahead of the winter heating season.

Benchmark Dutch TTF futures for Oct22 were up 11% at around €207/MWh in late European hours, but off from the earlier one-week high of €212/MWh.

The Nov22 contract reached a high of €233/MWh before easing back to €228/MWh on the close, with prices also boosted by threats to gas supplies via Ukraine.  

Although the shutdowns have no impact on immediate supply/demand fundamentals, the suspected sabotage has increased future supply risks and raised geopolitical tensions.

"From a supply perspective, little has changed given that the Nord Stream 2 pipeline has never come into commercial operation, whilst flows along the Nord Stream 1 pipeline came to a complete halt in late August/early September," said Warren Patterson, head of ING's commodity research.

"However, this latest incident suggests that flows along Nord Stream 1 are unlikely to restart for the foreseeable future. In addition, with suggestions that the leaks are due to sabotage, there will be safety concerns around other European energy infrastructure," added Patterson.

TTF prices have largely been in retreat during September despite the NS1 closure on expectations that EU storage would reach the target 85% ahead of November.

Denmark's energy agency first detected a drop in pressure on the unopened Nord Stream 2 pipeline on Monday, with Swedish maritime officials reporting a series of leaks on the Nord Stream 1 pipeline several hours later.

Sabotage is the most likely cause of leaks in two Baltic Sea gas pipelines between Russia and Europe, European leaders have said, after seismologists reported explosions around the Nord Stream pipelines.

EU chief Ursula von der Leyen said the leaks were due to "sabotage", threatening the "strongest possible response" to any deliberate disruption of European energy infrastructure.

"Any deliberate disruption of European energy infrastructure is utterly unacceptable and will be met with a robust and united response," EU foreign policy chief Josep Borrell said in a statement on Wednesday, announcing the bloc would step up the protection of its energy infrastructure following the incidents.