European TTF gas prices top €180/MWh, uncertainty over turbine return date

Quantum Commodity Intelligence - European natural gas prices surged to fresh four-month highs Wednesday amid uncertainty over the return of a gas turbine from Canada, which Russia says is essential for the Nord Stream 1 pipeline in supplying gas to Germany.

Gazprom said Wednesday said it did not know if a turbine engine would be returned from Canada, adding that the functioning of Nord Stream could not be guaranteed even when the "critical" turbine is returned.

Nord Stream 1 was closed on Monday for summer maintenance, but analysts say the scheduled restart date of 21 July is looking increasingly unlikely, with European leaders flagging an extended shutdown as Russia uses maintenance as a pretext to restrict gas supplies to Europe.

Canada cast further uncertainty with Canada's Prime Minister Justin Trudeau saying Wednesday that the decision to return the equipment was a "difficult one". 

Over the weekend, Canada's minister of natural resources, Jonathan Wilkinson, said on Twitter that it would "grant a time-limited and revocable permit" to allow Siemens Energy to transport the turbine back to Germany.

Benchmark Dutch TTF futures have more than doubled since mid-June, reacting to shortfalls from Russia and the US after the closure of the Freeport export terminal.

The Aug22 contract Wednesday was 4.5% higher, closing at €180.50/MWh compared to month-ago levels of €80/MWh, while Dec22 was up 5% at €185/MWh. 

Gazprom said Wednesday that it "does not possess any documents that would enable Siemens to get the gas turbine out of Canada," saying failure to return the equipment would harm the safe operation of a compressor station at the Russian end of the pipeline.

Siemens, who is carrying out the maintenance, said its experts are "working intensively on all other formal approvals and logistics" following the political first step from Canada.

Mark Haefele, Chief Investment Officer, UBS Global Wealth Management, said: "While we believe that a cessation of Russian gas supply to Europe is a real possibility, one that would cause a Eurozone-wide recession with three consecutive quarters of economic contraction, there are also good reasons to assume that gas supplies will resume after the maintenance."