EUROPE GAS-Prices jump on U.S. LNG plant outage

British and Dutch wholesale gas prices rose sharply on Thursday morning, driven predominately by news of an outage at the Freeport liquefied natural gas (LNG) plant in the United States, a key supply point for European customers.

In the British gas market, the contract for next day delivery was up by 9 pence to 95 pence per therm by 0843 GMT, while the contract for within-day delivery rose by 17 pence to 105 p/therm.

The winter contract was up by 17.21 pence to 250 p/therm.

In the Dutch gas market, the day-ahead contract jumped by 10.65 euros to 87.50 euros per megawatt hour (MWh), while the July contract rose by 6.70 euros to 85.50 euros/MWh.

The market was driven by news that Freeport LNG, one of the largest U.S. export plants producing liquefied natural gas (LNG), will shut for at least three weeks following an explosion, with the impact estimated at some 1 million tonnes of LNG, traders and analysts said.

“In a context of weak Russian supply, LNG is the main element that has prevented European gas prices from returning to their March highs,” analysts at Engie EnergyScan said in a morning report.

The shutdown of Freeport LNG changes that picture, especially if some Asian players decide to return to the market for precautionary purchases, reviving competition with Europe, they added.

“If the impact is purely 1 million tonnes, then the price impact is an overreaction. But people remember Hammerfest, which took a lot longer to come back,” a trader said, adding a risk premium was now priced in for a longer outage.

The Norwegian Melkoeya LNG plant in Hammerfest, operated by Equinor, only restarted earlier this month following a near two-year outage after a fire damaged the facility.

Meanwhile, a lingering supply impact from ongoing maintenance in Norway and a dip in Russian gas flows through the Nord Stream 1 pipeline, added to a tighter supply picture, the trader added.

Britain’s gas system was undersupplied by around 1.7 million cubic metres (mcm), National Grid data showed.

In the European carbon market, the benchmark contract CFI2Zc1 rose by 0.50 euros to 80.31 euros a tonne.



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