EUROPE GAS-European Gas Prices Close Higher on Disruption to LNG Shipments
The benchmark European wholesale gas price closed Monday around 35-40% more expensive, after major LNG exporter Qatar Energy announced that it had stopped production due to attacks in the Middle East. A cargo standstill through the Strait of Hormuz also raised concern about the length of the disruption.
Qatar is soon to become the second largest LNG exporter in the world after the United States. It plays a significant role in balancing the demand for LNG on both the Asian and European market.
QatarEnergy, according to a source familiar with the situation, is set declare force majeure for LNG shipments.
The decision by Qatar to stop LNG production was likely a precautionary measure, as gas is an extremely flammable hydrocarbon. If a drone strikes a facility which is?flowing LNG/natural Gas, the result would be catastrophic... As for duration, one can assume that a force majeure situation will continue as long as 'Iran is retaliating' and ships cannot pass through the Strait of Hormuz," Scott Shelton, an energy analyst with British inter-dealer brokerage TP ICAP, said. The Dutch front-month at the 'TTF hub is seen as a benchmark for Europe. It was up 35% at 43.30 Euros per Megawatt Hour (MWh), or $15.25/mmBtu, by closing trade. Europe has been increasing its LNG imports in recent years to replace Russian gas after the invasion of Ukraine by Russia. The latest EU data shows that while it is increasingly dependent on U.S. LNG, in the third quarter 2025 it will source 6% of LNG from Qatar.
Around 20% of world LNG transits the Strait of Hormuz. A prolonged suspension or complete closure would increase competition for other sources of gas and drive up international prices.
Platts data shows that the benchmark Asian LNG price jumped by almost 39% Monday morning, with S&P Global Energy Japan Korea-Marker (JKM), which is widely used as a benchmark Asian LNG, now at $15.068 for a million British thermal -units (mmBtu).
Goldman Sachs analysts said that in a scenario of a one-month halt, it's likely that JKM and TTF could reach 74 euros/MWh (25 dollars/mmBtu), which is 1300% higher than current levels. This threshold would have triggered a large response to the European energy crisis 2022.
They added that a longer disruption lasting over two months would likely increase TTF prices by more than 100 Euros/MWh. ICE data shows that the British April contract?was higher by 32.15 pence, at 110.72 cents per therm.
Gas Infrastructure Europe's latest data shows that Europe also relies on LNG imports in order to fill up its gas storage facilities, which were depleted over the winter. They are now around 30% full. On Monday, a spokesperson for the European Commission said that the EU gas coordination group will be meeting on Wednesday with representatives of member state governments to assess the impact the growing conflict in the Middle East.
(source: Reuters)
