Dutch and British wholesale gas prices hit a more than 10-month intraday high on Thursday as the Middle East conflict and reports that North Korean troops were ready to help Russia in Ukraine kept traders on edge.
The benchmark front-month contract at the Dutch TTF gas hub hit 42.57 euros per megawatt hour at 0945 GMT, its highest intraday level since Dec. 1, LSEG data showed.
“Geopolitical risk premium is a main reason behind the rise,” one trading source said.
The price is still much lower than the August 2022 all-time high of 306.00 EUR/MWh, when prices spiked due to Russia’s invasion of Ukraine and a drop in Russian pipeline gas supply.
On Wednesday, the U.S. said that for the first time it had seen evidence that North Korea had sent 3,000 troops to Russia for possible deployment in Ukraine, a move that could mark a significant escalation in Russia’s war against its neighbour.
In the Middle East, an exchange of heavy fire between Israel and Hezbollah heightened supply concerns as Israeli strikes also hit the Syrian capital Damascus early on Thursday, Syrian state media reported.
“The change of tone in diplomacy in the Middle East might have added some risk premium to oil and gas now the main focus has shifted towards humanitarian aid instead of reaching a ceasefire anytime soon,” said Klaas Dozeman, market analyst at Brainchild Commodity Intelligence.
“More volatility might be ahead, but a correction cannot be ruled out barring any major developments,” he added.
Dozeman said LNG supply seems to be a bit behind last October, meaning that any increased demand could lead to gas storage withdrawals sooner than last year.
Storage sites are currently 95.3% full, European gas infrastructure data showed.
In the British market, the day-ahead contract TRGBNBPD1 was up 3.85 pence at 105.35 pence per therm, while the front-month contract TRGBNBPMc1 gained 2.22 pence to 105.97 p/therm, both at the highest intraday level since early December.
British gas-for-power demand is expected to rise by 32 million cubic meters per day to 68 mcm/d, mostly due to a decrease in wind power, LSEG analyst Ulrich Weber said.
Peak wind power generation in Britain is forecast at 15.7 gigawatts on Thursday and 7.8 GW on Friday, Elexon data showed.
In the European carbon market CFI2Zc1, the benchmark contract was up 1.23 euros at 66.12 euros a metric ton.
Source: Reuters (Reporting by Marwa Rashad; Editing by Nina Chestney and Jan Harvey)