Dutch wholesale gas prices rose to their highest intraday level in 10 weeks on Friday morning trade after Israeli strikes on Iran sparked concerns that renewed tensions in the Middle East could affect gas supply.
The benchmark Dutch front-month contract at the TTF hub (TRNLTTFMc1) rose by 1.9 euros, or 5.22% to 38.28 euros per megawatt hour (MWh), or around $13/mmBtu, its highest level since early April 4, according to LSEG data.
The price for August inched up 1.75 euros to 38.10 euros/MWh.
The British contract for July was 3.65 pence higher at 89.25 pence per therm.
Israel said it targeted Iran’s nuclear facilities, ballistic missile factories and military commanders on Friday at the start of what it warned would be a prolonged operation to prevent Tehran from building an atomic weapon. Iran has previously denied such intentions.
Iran promised a harsh response and Israel said it was working to intercept about 100 drones launched towards Israeli territory in retaliation. Israeli media said an order to citizens to remain near protected areas had been lifted, suggesting that most or all the drones had been neutralised.
The news sent oil prices to their highest in almost five months, which has lent indirect support to EU gas prices.
“Direct support also came from concerns of a possible blockage of the Strait of Hormuz through which 20% of world LNG supply transits, mainly from Qatar, and also from the United Arab Emirates,” Engie’s EnergyScan said in a morning note.
A trading source said there is a new risk premium now around potential disruptions to LNG shipping, and if oil stays strong, there’s some oil-to-gas switch potential.
Asian demand is currently weak, but if any escalation affects the delivery of Qatari supplies to Asian clients, they will have to buy more U.S. LNG, therefore forcing Europe to compete for cargoes.
LSEG analyst Yuriy Onyshkiv said the outlook for TTF today remains bullish, adding that today’s trading session will reflect the energy market’s reaction to this fresh conflict and the potential for further escalation.
Despite these developments, the supply-demand balance forecast for Northwest Europe remains largely unchanged, with only minor adjustments related to maintenance at the Oseberg field in Norway, Onyshkiv said.
The demand forecast also remains stable over the next two weeks, except for a 164 gigawatt hour per day (GWh/d) decline in Northwest Europe’s demand for heating on the day ahead, due to slightly warmer temperatures next week, partially offset by weaker wind speeds, LSEG data showed.
In the European carbon market, the benchmark contract (CFI2Zc1) was 1.06 euro higher at 76.45 euros per metric ton.
Source: Reuters