TTF natural gas surges on Russia Nord Stream 1 “indefinite” closure
Quantum Commodity Intelligence - European natural gas prices surged higher after Moscow failed to reopen the Nord Stream 1 pipeline over the weekend, sending buyers scrambling to cover shortfalls.
Dutch TTF futures for Oct22 soared by around a third in morning European trade, reaching a high of €290/MWh at one point, before settling around 15% higher on the day at €246/MWh.
The indefinite closure of the pipeline, which runs from Russia under the Baltic Sea to Germany, leaves Europe facing winter shortages and could derail plans for the EU to go into winter with inventories 80% full, a target that was almost reached at the end of August.
“It is going to force Europe to fast-track energy saving initiatives as the worst-case scenario of running out of gas this winter rises in probability. Ultimately, Germany would need to cut natural gas consumption by 15% to keep gas storage facilities from running empty," said ANZ commodity strategist Daniel Hynes.
NS1 shipment orders, published by the pipeline’s operator Friday, indicated that flows would restart on Saturday at a rate of 20% of normal capacity, the same level as before the three-day maintenance period.
However, Gazprom backtracked saying it will keep Nord Stream 1 offline indefinitely, a move believed to be a retaliation after the G7 announced price cap plans on Russian oil, although Moscow blamed an 'oil leak'.
“Following this announcement, we no longer assume gas supplies via the NS1 pipeline, either in the balance of 2022 or 2023. This removes ~30 mcm/d from our model, or ~4% of gas supply within our European perimeter,” said Morgan Stanley in a client note Monday.
“At our current TTF price forecasts, we estimate that 1) sufficient demand destruction will take place, and 2) Europe will continue to attract a record volume of LNG, to allow this to happen. As a result, rationing is still not necessary in our base case,” added the bank.
The Kremlin further warned the West Monday it would retaliate over a G7 proposal to impose a cap on the price of Russian oil. "There can only be retaliatory measures," Kremlin spokesman Dmitry Peskov told reporters
In late August the Oct22 contract reached a record high of €348.785/MWh on fears the Nord Stream maintenance would be used by Moscow as a prelude for ongoing Russian supply shortfalls.
