Europe faces rising natural gas prices as winter demand peaks and supply concerns grow

The article provides an overview of the current state of natural gas supply and demand in Europe as it heads into winter. Here are the key points:

1. Rising natural gas prices: Natural gas prices on the TTF (Title Transfer Facility) benchmark briefly reached their highest level in two years, hitting 49.03 euros/MWh. By noon on the day of the report, prices for one-month delivery were around 48 euros/MWh. This represents a nearly 10-euro increase from the start of November, pushing prices toward levels not seen in nearly a year.
2. Price increase trends: Since mid-September, natural gas prices have risen by nearly 40%, driven largely by fears that Europe might face disruptions in its pipeline gas supply. The lowest price for TTF futures contracts this year was recorded in late February, at 28.8 euros/MWh.
3. Supply concerns: A key issue is the uncertainty surrounding Russian gas supply. Austria’s OMV energy company, in a dispute with Russia’s Gazprom, decided to deduct compensation for irregular deliveries in 2022 from its financial obligations. In response, Gazprom reduced its deliveries to Austria, though some gas continues to flow through intermediaries. Additionally, sanctions on Russia’s Gazprombank and the potential expiration of the transit agreement through Ukraine at the end of the year further fuel concerns over the stability of Russian gas deliveries.
4. Increased LNG imports: With fears of reduced pipeline supplies, Europe is turning to liquefied natural gas (LNG) imports. November LNG imports are expected to reach 9.16 million tons, marking a 21% increase compared to October and a 44% increase compared to September, when imports dropped to a three-year low. The United States, the world’s largest LNG exporter, is expected to contribute significantly to this increase. Europe is projected to import 4.32 million tons of US LNG in November, a 40% rise compared to October.

In summary, Europe is facing a tight natural gas market due to various geopolitical factors, including the reduced supply of Russian gas and rising demand for LNG. Buyers are likely to face higher prices as a result.