Benchmark Dutch and British wholesale gas prices rose almost 50% on Monday after major liquefied natural gas (LNG) exporter Qatar Energy said it had halted production due to attacks in the Middle East.
Qatar will soon consolidate its role as the world’s second-largest LNG exporter after the United States, playing a key role in balancing LNG demand in both Asian and European markets.
Sources told Reuters that Qatar Energy plans to declare force majeure on the LNG shipment.
Europe has been increasing its LNG imports in recent years as it aims to phase out Russian gas in response to Russia’s invasion of Ukraine.
About 20% of the world’s LNG passes through the Strait of Hormuz, and a prolonged suspension or complete closure would increase global competition for other gas sources and push up international prices.
“Any disruption to LNG flows would reignite competition between Asia and Europe for available cargo,” said Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie. The Dutch front-month contract at the TTF hub, considered Europe’s benchmark price, rose by almost 50%, or 15.976 euros, to 47.935 euros per megawatt hour (MWh) (about $16.40/mmBtu) by 1355 GMT, ICE data showed.
Prices had already risen by about 25% earlier in the day, but rose further after Qatar Energy’s production suspension.
Asian LNG benchmark prices rose almost 39% on Monday morning to $15.068 per million British thermal units (mmBtu) on the S&P Global Energy Japan-Korea Marker (JKM), a widely used Asian LNG benchmark, according to Platts data.
“If the LNG and gas market starts to price in long-term losses in LNG supply from Qatar, TTF could jump to 80-100 euros/MWh ($28-35/mmBtu),” said Warren Patterson, head of commodity strategy at ING. The UK April contract rose 43.96p to 122.53p per therm, according to ICE data.
Europe relies on LNG imports to help fill gas storage facilities that ran dry over the winter, and are currently around 30% full, the latest data from European Gas Infrastructure Europe showed. A European Commission spokesperson told Reuters on Monday that the EU’s gas coordination group, which includes representatives from member state governments, will meet on Wednesday to assess the impact of the growing conflict in the Middle East.
It monitors the security of gas storage and supply within the EU and coordinates crisis response measures. In the European carbon market, the benchmark contract fell by €1.10 to €69.17 per tonne.
(Reporting by Susanna Tweedale; Additional reporting by Nora Buri in Oslo and Marwa Rashad in London; Editing by Nina Chesney)
