European gas prices double in 10 days as traders remain on the edge

European gas prices have doubled in just 10 trading days, highlighting how the market still remains on the edge over the continent’s gas supplies despite storage levels at record highs for the time of year.

In Thursday trading the price of the European gas benchmark Title Transfer Facility (TTF) rose as much as 27 per cent on the day to €49.50 per megawatt hour, its highest level since early April. At the start of June, TTF had fallen to as low as a two-year low of €23/MwH.

While prices are still down substantially from their peaks last summer, when the cut off of Russian pipeline supplies propelled TTF to eye-watering heights above €340/MwH, traders said market participants remain jittery. Underscoring the volatility, TTF prices later momentarily traded below the previous day’s close before rising 7.3 per cent at €42.80.

Fresh reports that the Netherlands is to follow through with plans this year to close its Groningen gasfield — once Europe’s largest single source of domestic supplies — triggered the rally on Thursday, while forecasts for hotter weather and supply outage extensions at key fields in Norway continue to support prices.

Supply disruptions have added to fears that European gas markets are still adjusting to a new reality, where securing seaborne imports of liquefied natural gas are critical for replacing the Russian pipeline supplies that met 40 per cent of EU demand before the invasion of Ukraine.

“Reports of Groningen closing down adds to a host of other news that are bullish for gas prices,” said Tom Marzec-Manser at energy consultancy ICIS. “But the price swings are an indication that there is still a lot of uncertainty over Europe’s gas outlook, and market participants remain on the edge,” he said.

Hans Vijlbrief, the Dutch state secretary for mining, told the FT in January that Groningen will be shut by October 1 but if necessary, it would remain open until October 2024.

Production at the Groningen gas was reduced to 2.8 bcm per annum last year, the minimum to keep its pumps working, with tremors blamed on drilling causing damages to property in the area.

While Europe’s gas storage sites are now more than 70 per cent full, and well on its way to achieving the bloc’s target of 90 per cent full storage by the start of November, storage alone cannot meet demand in the winter.

Before this month’s rebound in TTF, the price of LNG in Northeast Asia had briefly moved above the European market for one of the first times since the start of the energy crisis, incentivising traders to send cargoes east.

But with the price surge in recent days, TTF has regained its premium over Asian gas markets, re-incentivising traders to send LNG to Europe.

“We’ll see [the competition for LNG] again this year and in subsequent years. The link between European and Asian LNG markets and prices will be generally stronger than before the Ukraine war because Europe buys much more LNG now,” said Glen Kurokawa, power sector lead at consultancy CRU.

But Kurokawa said he did not think competition for LNG would be quite as intense this year compared to 2022, arguing that Europe had cut gas “consumption for industry” and the power sector compared to last year.