European natural gas prices remained elevated during Week 35 of 2024 despite solid supply fundamentals, as concerns over supply disruptions linked to the ongoing Russia-Ukraine war and maintenance work on Norway’s gas infrastructure persisted. Market participants were particularly anxious about potential interruptions to Russian pipeline gas transiting through Ukraine, while outages in Norwegian facilities were feared to extend beyond their current schedules.
Dutch wholesale gas prices at the TTF hub climbed on Monday, August 26, and Tuesday, August 27, due to concerns over supply, particularly the extended outage at Australia’s Ichthys LNG plant and ongoing geopolitical tensions. However, robust storage inventories helped limit price spikes. On Tuesday, the benchmark futures contract at the Dutch TTF hub traded at €39.135/MWh, according to ICE Exchange data.
The extended outage at the Ichthys LNG plant, operated by Inpex Corp, has delayed the restart of Train 2 until October. This delay could intensify competition for spot LNG between European and Asian buyers, especially as heatwaves in Asia drive up cooling demand. In turn, this could lead to higher European prices, especially if more spot cargoes are required to balance the market. With Norway entering its annual maintenance period, and numerous facilities facing outages, European gas supplies could tighten further in the coming weeks.
Midweek, on August 28 and 29, gas futures at the TTF hub eased below €39/MWh, though prices remained in a high range. Ongoing maintenance at several Norwegian gas infrastructure sites kept supplies constrained. Norwegian output dipped on Thursday, as the Kollsnes gas processing plant reduced capacity by 18 Mcm/d, with further reductions of 61 Mcm/d expected in early September, according to LSEG data.
By Friday, August 30, TTF gas futures rose again to €39.823/MWh, reflecting concerns over intensified conflicts in both the Middle East and the Ukraine-Russia border. Although the immediate threat of a broader war in the Middle East eased slightly after limited exchanges between Israel and Hezbollah, Iran remained a looming risk. In Ukraine, Russia escalated its missile and drone attacks, with heavy strikes across numerous regions.
At the time of writing, the one-month forward contract at TTF was trading at €36.430/MWh. Europe is now bracing for a potentially tighter gas market as Norway’s maintenance season unfolds. Norway, which now supplies around 30% of Europe’s natural gas, has become the largest supplier after the sharp reduction of Russian gas flows. However, there are growing concerns about the remaining gas flows via Ukraine, which could be suspended if the conflict escalates, further tightening supplies.
The uncertainty surrounding the gas transit deal between Russia and Ukraine, which is set to expire on December 31, is also keeping front-month futures elevated. Russia’s Kremlin spokesman, Dmitry Peskov, warned that European consumers would face higher prices if Ukraine does not extend the gas transit agreement. He emphasized that Russia had alternative options for gas delivery, including the proposed gas hub in Turkey, agreed upon with Ankara in 2022. This hub would serve southeastern and central European countries still importing Russian gas via the TurkStream pipeline.
Slovakia and Austria, two countries heavily reliant on gas transiting Ukraine, may be significantly impacted if the deal is not extended. Slovakia has floated the idea of a European consortium taking over gas deliveries at the Russia-Ukraine border, while Azerbaijan has expressed interest in facilitating continued gas transit via Ukraine. Gazprom is contracted to send 40 Bcm of gas to Europe via Ukraine in 2024, but the volumes have fallen short since May 2022, following Ukraine’s declaration of force majeure at the Sokhranivka entry point due to a loss of control in eastern Ukraine.
