Gas prices in Europe continue to break records

SEPTEMBER 08, 2021

The price of the October futures for the TTF spot index on the ICE Futures on September 8 afternoon jumped to 54.945 euros per kWh, or $671 per 1,000 cubic meters, Report informs referring to Interfax.

Russian gas supplies to Europe via the Yamal-Europe gas pipeline on September 8 fell even more, to 2.6 million cubic meters per hour from 2.7 million cubic meters per hour the day before.

European natural gas futures surged to record highs on Monday as the amount of Russian gas flowing into Europe through a key entry point dipped, crimping supplies in an already tight market, Bloomberg reports.

In September, Gazprom pumped no more than 109 million cubic meters per day through Ukraine (the norm of a long-term transit contract), Interfax noted.

With European stockpiles about 20 percent below the seasonal average just weeks before the heating season, traders are focused on Europe-bound supply routes for Russian gas and winter demand, said Julien Hoarau, head of Paris-based consultant Engie EnergyScan, according to Bloomberg.

Europe will face a very tight winter, and an extreme weather event could push prices over 100 euros per megawatt-hour, he said.

Gas flows at the Mallnow station in Germany, which handles Russian fuel from a major transit pipeline, dropped to its lowest in two weeks. Volumes through this route started falling at the end of July and plunged further after a fire at a Gazprom facility in Russia in early August.

Gazprom said it’s meeting in full requests of its European consumers who receive gas via the Yamal-Europe pipeline, which transports the fuel into Mallnow.

Prices also rose as the cost of carbon permits under the European Union’s emissions-trading system surged to a new high, raising the attractiveness of gas as a cleaner-burning fuel in power generation.

Demand in Asia is expected to continue drawing cargoes of liquefied natural gas away from Europe. Industrial production in China and India is putting considerable demands on power generation, much of which is being produced from coal but gas has also been affected, Citigroup analysts said in a note.

The market is also on the lookout for signs when the Nord Stream 2 gas pipeline from Russia to Germany starts operations. Flows through the contentious link could potentially ease market tightness ahead of the peak winter season.

The first shipments are expected before the end of the year as the last section of pipe has now been welded and will be lowered onto the seabed. The next step will be to connect the Danish and German sections before pre-commissioning works are carried out.