(Bloomberg) — European natural gas prices settled at the highest level this year after flows from Norway slumped, highlighting the risk of relying too much on one major supplier.
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Benchmark Dutch gas futures closed 5.2% higher at €36.01 per megawatt-hour. The contract earlier surged as much as 13%, the biggest intraday jump since December.
It isn’t clear how long an unplanned outage will last at Norway’s massive Nyhamna gas processing plant. At the same time, Norwegian flows into the UK’s Easington terminal, an entry point for a third of Britain’s total supply, halted. UK gas futures rose as much as 15%, the most since October.
The outages show the pivotal role Norway plays in supplying Europe after Russia cut most pipeline deliveries in the fallout of the war in Ukraine. Even after the energy crisis, the market remains very sensitive to supply issues, and prices react quickly when there’s any deviation from the scheduled seasonal maintenance plans.
“We as Europeans are dependent on the rest of the world for our energy supply, and that’s a vulnerable situation to be in,” Jesper Johanson, chief executive officer of Danish trader InCommodities A/S, said in an interview.
Equinor ASA is mapping out the repairs for a segment of pipeline at the Sleipner gas field in the North Sea, with operator Gassco AS looking at ways to redirect the gas if the damage leads to a prolonged outage, said Alfred Skar Hansen, Gassco’s senior vice president for system operation.
A remit notice later confirmed that the outage is related to “transport restrictions at Sleipner riser” and will have an “uncertain duration.” Sleipner sits between the Nyhamna plant and Easington terminal and is connected by Langeled pipelines.
Equinor Assesses Redirecting Gas to Ease Norway Outage: Gassco
The rally occurred even with storage sites about 70% full and industrial demand in Europe slow to recover. Dutch gas futures have gained for three consecutive months, jumping 18% in May.
While Europe used to rely on Russia for about a third of its gas, the region now depends increasingly on piped flows from Norway and on liquefied natural gas supplies from the US and Qatar.
Adding to the bullishness, Europe’s LNG imports have declined in recent weeks amid higher demand in Asia, where a heat wave is increasing consumption for cooling. That’s driving competition for cargoes, said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
US natural gas futures also traded higher, while a focus is also on disruptions at some global LNG facilities.
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In power markets, German day-ahead electricity eased from the highest since November, settling at €107.23 a megawatt-hour, on Epex Spot SE. The July contract also increased to the highest month-ahead price since January.
–With assistance from Kari Lundgren, Eamon Akil Farhat, Lars Paulsson and Elizabeth Elkin.
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