Natural gas futures prices recorded a new high in European trading, reaching their highest levels in 4 months. The increase comes in light of concerns regarding European gas infrastructure and the repercussions of tensions in the Middle East.
Bloomberg reported that the price of futures recorded an increase of 12 percent. Therefore, gas prices increased to slightly less than 50 euros per megawatt-hour. In addition, natural gas prices hit their highest level since mid-June, following an increase of 15 percent on Monday.
Leakage in gas pipeline
Prices progressively increased following a report by Bloomberg about an investigation into a leak from an undersea gas pipeline. The leak is believed to be between Finland and Estonia. It is possible that it was caused by an intentional act of sabotage.
Meanwhile, Israeli authorities asked Chevron to stop production from the Tamara gas field due to security concerns. Production continues in the Israeli Leviathan gas field.
Standard Dutch TTF Natural Gas Futures prices rose by 11 percent to 48.88 euros per megawatt-hour, while British gas prices rose by 12 percent.
Earlier, the cabinet of Egypt stated that natural gas imports fell to zero from 800 million cubic feet per day. This increased the pace of power outages.
Impact of reduced production on prices
Goldman Sachs stated that reducing gas production in Israel due to the ongoing conflict will lead to a global supply decline. However, the impact on European gas prices is marginal at present.
The international investment bank and financial services company noted that “reduction in global LNG supply is marginal to Dutch TFT natural gas futures prices”. Impact on supply in northwestern Europe determines the price of TFT more than disruption in production does. It noted that the mild weather so far this month has offset the impact of potential disruption to LNG supplies.
However, Goldman Sachs believes that risks to gas prices in Europe are increasing. That is due to the uncertainty about the duration of the disruption of gas production. Uncertainty is also increasing due to the repercussions of the ongoing conflict in the Middle East.
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