Europe’s LNG Prices Hit Highest Level in 4 Months

Natural gas futures prices in European trading rose freshly during Tuesday’s trading, hitting their highest levels in four months amid concerns about the infrastructure of European gas networks and the fallout from tensions in the Middle East.

The price of futures rose 12% to just under 50 euros per megawatt-hour, the highest level since mid-June, after rising 15 percent on Monday, the Bloomberg news agency reported.

The price spike continued after a report by Bloomberg of an investigation into a leak from an undersea gas pipeline between Finland and Estonia, possibly caused by a deliberate act of sabotage.

This comes as Israeli authorities have asked Chevron to halt production from the Tamara field due to security concerns, while production continues at Israel’s Leviathan field.

Part of Israel’s natural gas is exported to Egypt where it is liquified at two liquefaction plants before being sent to customers in Europe. But Egypt halted the export of liquified gas due to increased domestic demand for electricity in the summer.

The price of Dutch standard natural gas contracts rose 11 per cent to €48.88 per megawatt-hour, next month’s delivery by 2:30 p.m., while the price of British gas rose by 12%.

The reduction in gas production in Israel due to the ongoing conflict is likely to lead to a decline in global supply, but the impact on European gas prices is marginal for now, Goldman Sachs said.

Goldman added in a note on Monday: “The reduction in the supply of liquified natural gas globally is marginal to the prices of the T platform. T. F (Dutch for gas futures trading) at the moment, as its ultimate impact on supply in the Northwest European region that sets the price of T. T. F is less than the total volume of downtime.”

Moderate weather so far this month has offset the impact of a potential shutoff on LNG supplies, the bank noted.

However, the bank sees risks to gas prices in Europe tiling upwards due to uncertainty over how long gas production was disrupted and amid growing uncertainty about the geopolitical implications of the ongoing conflict in the Middle East.