EUROPE GAS - European gas prices rise as Qatar stops LNG production
Benchmark Dutch and British wholesale?gas?prices rose by almost 50% Monday after a major LNG exporter, Qatar Energy, announced that it had stopped production due to the attacks in Middle East.
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 preparing to declare force majeure for LNG shipments.
Europe has been increasing its LNG imports over the last few years in order to phase out Russian Gas following Russia's invasion into Ukraine.
Around 20% of world LNG transits the Strait of Hormuz. A prolonged suspension or complete closure would increase competition globally for other sources of gas, driving prices up internationally.
Massimo Di Odoardo is vice president of gas and LNG research at Wood Mackenzie. He said that disruptions to LNG flows could reignite competition between Asia and Europe over available cargoes. The Dutch front-month 'contract at the TTF Hub, considered a benchmark for Europe, rose almost 50% or 15.976 euro to 47.935 euros (around $16.40/mmBtu) by 1355 GMT.
QatarEnergy's production stoppage extended the gains made earlier that day.
Platts data shows that the benchmark Asian LNG price, which is widely used to measure Asian LNG prices, jumped 39% in just one day on Monday. The S&P Global Energy Japan Korea-Marker (JKM), which is widely used as a benchmark Asian LNG price, was $15.068 per million British Thermal units (mmBtu) at that time.
Warren Patterson, ING's head of commodities strategy, stated that "if LNG/gas markets begin to price in a prolonged period of loss to Qatari LNG supplies, TTF could spike up to 80-100 euros/MWh (28-35 mmBtu)". ICE data shows that the British April contract is up?43.96 at 122.53 pence?per therm.
Gas Infrastructure Europe's latest data shows that Europe also relies on LNG imports to fill up its gas storage facilities, which were depleted during the winter and 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 of the growing conflict in the Middle East.
It coordinates crisis response and monitors storage of gas and the?security supply in EU. The benchmark contract on the European carbon markets was down by 1.10 euros at 69.17 euro per metric ton.
(source: Reuters)