European fuel costs have doubled in simply 10 buying and selling days, highlighting how the market nonetheless stays on the sting over the continent’s fuel provides regardless of storage ranges at document highs for the time of yr.
In Thursday buying and selling the value of the European fuel benchmark Title Switch Facility (TTF) rose as a lot as 27 per cent on the day to €49.50 per megawatt hour, its highest stage since early April. At the beginning of June, TTF had fallen to as little as a two-year low of €23/MwH.
Whereas costs are nonetheless down considerably from their peaks final summer season, when the reduce off of Russian pipeline provides propelled TTF to eye-watering heights above €340/MwH, merchants mentioned market members stay jittery. Underscoring the volatility, TTF costs later momentarily traded under the day prior to this’s shut earlier than rising 7.3 per cent at €42.80.
Recent stories that the Netherlands is to comply with by way of with plans this yr to shut its Groningen gasfield — as soon as Europe’s largest single supply of home provides — triggered the rally on Thursday, whereas forecasts for warmer climate and provide outage extensions at key fields in Norway proceed to assist costs.
Provide disruptions have added to fears that European fuel markets are nonetheless adjusting to a brand new actuality, the place securing seaborne imports of liquefied pure fuel are vital for changing the Russian pipeline provides that met 40 per cent of EU demand earlier than the invasion of Ukraine.
“Experiences of Groningen closing down provides to a bunch of different information which are bullish for fuel costs,” mentioned Tom Marzec-Manser at vitality consultancy ICIS. “However the value swings are a sign that there’s nonetheless a variety of uncertainty over Europe’s fuel outlook, and market members stay on the sting,” he mentioned.
Hans Vijlbrief, the Dutch state secretary for mining, told the FT in January that Groningen can be shut by October 1 but when essential, it might stay open till October 2024.
Manufacturing on the Groningen fuel was diminished to 2.8 bcm each year final yr, the minimal to maintain its pumps working, with tremors blamed on drilling inflicting damages to property within the space.
Whereas Europe’s fuel storage websites at the moment are greater than 70 per cent full, and nicely on its option to attaining the bloc’s goal of 90 per cent full storage by the beginning of November, storage alone can’t meet demand within the winter.
Earlier than this month’s rebound in TTF, the value of LNG in Northeast Asia had briefly moved above the European marketplace for one of many first instances for the reason that begin of the vitality disaster, incentivising merchants to ship cargoes east.
However with the value surge in latest days, TTF has regained its premium over Asian fuel markets, re-incentivising merchants to ship LNG to Europe.
“We’ll see [the competition for LNG] once more this yr and in subsequent years. The hyperlink between European and Asian LNG markets and costs can be typically stronger than earlier than the Ukraine warfare as a result of Europe buys way more LNG now,” mentioned Glen Kurokawa, energy sector lead at consultancy CRU.
However Kurokawa mentioned he didn’t suppose competitors for LNG can be fairly as intense this yr in comparison with 2022, arguing that Europe had reduce fuel “consumption for trade” and the facility sector in comparison with final yr.
