Following a 40% surge on Monday, Europe’s benchmark natural gas prices soared by another 30% at opening on Tuesday as the halt of LNG production in Qatar, the world’s second-largest LNG exporter, roiled global gas markets and put energy security in Asia and Europe at risk.
The front-month Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, jumped by 34% at opening before paring some gains, but they were still 26% higher since Monday’s close as of 8:30 a.m. in Amsterdam on Tuesday.
Europe’s natural gas prices have now jumped by about 70% since markets closed on Friday.
The futures jumped by over 50% in intraday trading on Monday, and settled 3% higher at closing, after QatarEnergy announced that “Due to military attacks on QatarEnergy’s operating facilities in Ras Laffan Industrial City and Mesaieed Industrial City in the State of Qatar, QatarEnergy has ceased production of liquefied natural gas (LNG) and associated products.”
With the world’s second-biggest LNG exporter, second only behind the U.S., out of the LNG supply market for the time being, concerns intensified in Europe and Asia about gas supply and procurement for the rest of the winter season. Officially, this heating season ends on March 31, but Europe will need a lot of cargoes to arrive in the spring and summer to refill the gas storage sites that have been depleted to the lowest level in years.
This winter, gas storage sites in Europe have drained at the fastest pace in five years, amid below-average winter temperatures which drove heating and power demand higher.
EU gas storage sites were estimated to be just 30% full as of March 1, according to data from Gas Infrastructure Europe.
With Qatar’s supply out and about 20% of global LNG trade transiting the now de facto closed Strait of Hormuz in the Middle East, competition for LNG supply between Europe and Asia will intensify, driving prices higher.
By Michael Kern for Oilprice.com
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