Bullish Momentum for European Natural Gas Prices Expected to Continue Amid Supply Disruption Fears

European Natural Gas Prices Soar on Supply Disruption Fears

Energy analysts believe that the recent surge in European natural gas prices will continue in the coming months after futures skyrocketed by almost 40% on Wednesday.

The front-month gas price at the Dutch Title Transfer Facility (TTF) hub, a European benchmark for natural gas trading, reached its highest level since mid-June due to concerns over potential supply disruptions in Australia.

Although it briefly hit an intraday high of over 43 euros ($47.4) per megawatt hour, the price has since retreated and was trading at around 39 euros on Thursday.

In the United States, gas futures for September delivery on the New York Mercantile Exchange also rose significantly, settling at $2.96, their best performance since mid-June and the highest closing price since early March.

This surge in gas prices was triggered by the possibility of a strike at major liquefied natural gas (LNG) facilities in Australia, where workers are demanding higher pay and improved job security.

According to Zongqiang Luo, a gas analyst at energy consultancy Rystad Energy, this strike could disrupt around half of Australia’s LNG export capacity, leading many Asian buyers to seek alternative sources for their LNG cargoes.

Furthermore, planned maintenance for Norwegian pipelines and ongoing heatwaves in multiple regions globally are expected to contribute to the bullish outlook for gas prices.

Concerns of a Gas Shortfall in Europe

The spike in gas prices comes at a time when the euro zone is reducing its reliance on Russian fossil fuel exports following the Kremlin’s invasion of Ukraine.

Despite securing large gas deals with other countries, there is still a possibility of a gas shortfall in Europe, which could force buyers to purchase at spot prices, similar to what happened in 2022.

European buyers are particularly concerned about the security of their gas supply due to production issues and compromised gas fields in Australia, the current top exporter of LNG.

Additionally, the extension of a force majeure declared in Nigeria last year has contributed to tightness in the LNG market.

However, analysts believe that there are currently no major disruptions in the energy sector that could halt this rally in gas prices.

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