TTF natural gas prices ease back, IEA warns of further stress tests

Quantum Commodity Intelligence - European natural gas prices eased Tuesday from the previous session's steep gains, even as the International Energy Agency (IEA) warned the gas market faces further challenges moving into the crunch winter season.

Benchmark TTF futures for October delivery were around €73/MWh in late afternoon European trading, compared to Monday's close of over €75/MWh, which in turn was a 15% gain on Friday's close at just above €65/MWh.

"The European gas market could well face further stress tests from unplanned outages and sharp cold spells, especially if they occur late in the winter," said the IEA in a statement Tuesday, noting gas storage levels in Europe are well below their five-year average.

Gas prices have become a major political issue in recent days amid fears of widespread power shortages in the event of a cold snap, while gas suppliers and energy-intensive industries have faced severe financial constraints with many going bust in the UK.

There are also broader concerns that gas and power shortages could derail the energy transition timetable with renewable fuels unable to meet growing demand requirements across the globe.

However, IEA Executive Director Fatih Birol said Tuesday: "Recent increases in global natural gas prices are the result of multiple factors, and it is inaccurate and misleading to lay the responsibility at the door of the clean energy transition".

The IEA said it believes that Russia could do more to increase gas availability to Europe and ensure storage is filled to adequate levels in preparation for the coming winter heating season.

Price surge

The energy watchdog also noted European electricity prices have climbed to their highest levels in over a decade in recent weeks, rising above €100/MWh in many markets, including Germany and Spain, where prices have been three or four times the averages seen in 2019 and 2020.

In Asia, benchmark JKM futures for November settled at a fresh record high of $27/mmBtu on Monday, according to exchange data, with Asian prices typically outpacing Europe by $2-3/mmBtu.

By contrast, benchmark US Henry Hub natural gas was trading around $5/mmBtu on Tuesday, opening huge arbitrage opportunities to Europe and Asia.

Shipping from the US to Asia typically adds around $10/mmBtu to delivered prices before storage and other logistics expenses.

Natural gas pricing was a major talking point at the Gastech conference in Dubai Tuesday, as delegates gathered for the first major in-person energy conference since the pandemic.

"There is huge demand right now for Qatar's LNG. Qatar cannot cater for everyone's LNG needs," said Qatar's Minister of Energy, Saad Sherida Al-Kaabi.

Qatar is the world's largest exporter of LNG.