Europe’s natural gas prices rose sharply after a fire at a major US export terminal promised to wipe out supplies to a market that is on high alert over tight Russian supplies.
Benchmark futures traded in Amsterdam got a six-day falling streak, while UK prices rose more than 34%. The Freeport liquefied natural gas plant in Texas, which accounts for about one-fifth of all U.S. fuel exports, will remain closed for at least three weeks. The United States shipped nearly 75% of all its LNG to Europe in the first four months of this year.
The closure comes as pipeline supplies from Europe’s best providers are also limited. Key facilities in Norway are undergoing annual maintenance this week, while Russia’s supplies are under capacity after several European buyers were cut off for refusing to meet Moscow’s demands to eventually be paid in rubles for their pipeline fuel.
“An export halt in the winter months with high demand would have triggered a much bigger reaction, but the event highlights Europe’s precarious situation and it will probably signal an end for now to the calm trade seen in recent weeks,” says Ole Hansen, Head of Commodity Strategy at Saxo Bank A / S.
Europe has been particularly dependent on US LNG to help offset the risk of disruption to Russian pipeline imports, and abundant supplies of fuel in recent weeks had calmed the market following wild fluctuations earlier in the year.
“The growing importance of US gas exports to a gas-hungry Europe has been clearly highlighted by price movements on both sides of the dam over the past few hours,” said Saxo Banks Hansen.
The extent of the damage to the Freeport facility is not yet clear, but the fire could potentially knock out about 16% of total U.S. LNG export capacity “in an unknown period of time if the fire damage proves difficult to repair,” said analysts at Evercore ISI . in a note.
Dutch front-month gas, the European benchmark, traded 12% higher at 89.13 euros per tonne. megawatt-hour at 8:53 in Amsterdam. The contract fell 16% compared to the previous six sessions.
UK next month futures jumped to 174.14 pence a term. Broadcasts from Britain’s LNG terminals, a major European destination for US cargo, fell about 30% on Thursday to its lowest since mid-March.
Even with lukewarm consumption in most of Europe in mild weather, this means that energy companies may have to turn to gas storage, just as stock levels have improved recently and are getting closer to historical averages.
LNG buyers are likely to start chasing replacement shipments from the spot market, but there is a dwindling amount of supplies available, according to dealers in Asia. The move is likely to increase the already intense competition between Asia and Europe for fuel.
Gas flows from Norway rose again after a one-day stop of the giant Troll field for annual testing on Wednesday, but are still below normal as seasonal work at a number of facilities continues. Shipments of Russian gas via the Nord Stream pipeline to Germany will continue to fall on Thursday, online data shows.
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