The market is accumulating concerns as the expiration of the gas transit agreement between Russia and Ukraine approaches, scheduled for the end of the year, with no new agreement in sight.
Benchmark natural gas prices in Europe have risen sharply, reaching their highest level since November 2023, boosted by cold weather impacting storage levels, and the prospect of Russian gas supply via pipeline stopping. , via Ukraine.
Dutch natural gas futures contracts TTF, the benchmark for gas trading in Europe, have recorded a clear increase in recent days, settling last Thursday at 45.40 euros ($47.83) per megawatt hour ( MWh). The market is accumulating concerns as the expiration of the gas transit agreement between Russia and Ukraine approaches, scheduled for the end of the year, with no new agreement in sight.
“The possibility of a halt in Russian supplies in the coming months worries traders,” said traders cited by Platts. In this context, the German Ministry of Economy has asked LNG terminal operator Deutsche Energy Terminal (DET) to reject any Russian LNG cargo that attempts to be delivered, reinforcing the sentiment of tightening supply, while forecasts of increased demand for LNG and gas are mounting at the start of the cold season.
Furthermore, gas stocks are being depleted more quickly than last year. In the event of cold winters, the current pace of withdrawals could leave stocks in a deplorable state, notes Platts.
“It appears (…) that the storage situation may soon cease to be comfortable, as stocks are being depleted at a much higher rate than last year and key markets like the Netherlands already have stocks running out. decline, filled at around 80%,” indicates an analyst.
European gas stocks were 92.58% full, according to the latest data from Aggregated Gas Storage dated November 12, compared to 99.37% a year ago. The withdrawal rate has averaged 0.039% since the start of winter, which contrasts with the 0.09% injection rate recorded during the same period last year.
During the week, European gas stocks fell by 2.16% between November 5 and 12, compared to a fall of 0.13% last year during the same period.
For LNG, “there is strong potential for price increases as European LNG demand is expected to increase, Russian supply is halved and there is a reasonable possibility of colder than normal weather in Europe or in Asia,” said a senior research analyst for European and Russian LNG at Commodity Insights.
For the first time this year, LNG prices in northwest Europe are more expensive compared to benchmark prices in northeast Asia, with European concerns over supply shortages reinforcing bullish sentiment.
