European gas prices soar as Qatar halts LNG production

Benchmark Dutch and British wholesale gas prices soared by 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, soon to cement its role as the world’s second largest LNG exporter after the United States, plays a major role in balancing both Asian and European markets' demand of LNG.

A source with knowledge of the matter told Reuters QatarEnergy is set to declare force majeure on shipments of LNG.

Europe has increased imports of LNG over the past few years as it seeks to phase out Russian gas following Russia’s invasion of Ukraine.

Around 20% of the world’s LNG transits through the Strait of Hormuz and a prolonged suspension or full closure would increase global competition for other sources of the gas, driving up prices internationally.

"Disruptions to LNG flows would reignite competition between Asia and Europe for available cargoes," said Massimo Di Odoardo, vice president, gas and LNG research at Wood Mackenzie.

The Dutch front-month contract at the TTF hub, seen as a benchmark price for Europe TFMBMc1, was up almost 50%, or 15.976 euros at 47.935 euros per megawatt hour (MWh), (around $16.40/mmBtu), by 1355 GMT, ICE data showed.

Prices were already some 25% higher earlier in the day but extended gains after QatarEnergy's production halt.

Benchmark Asian LNG prices jumped almost 39% on Monday morning with the S&P Global Energy Japan-Korea-Marker (JKM), widely used as an Asian LNG benchmark, at $15.068 per million British thermal units (mmBtu), Platts data showed.

"If LNG/gas markets start to price in an extended period of losses to Qatari LNG supply, TTF could potentially spike to 80-100 euros/MWh ($28-35/mmBtu)," Warren Patterson, head of commodities strategy at ING, said.

The British April contract NGLNMJ6 was up 43.96 pence at 122.53 pence per therm, ICE data showed.

Europe is also relying on LNG imports to help fill its gas storage sites which have been depleted over the winter and are currently around 30% full, the latest data from 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 widening conflict in the Middle East.

It monitors gas storage and security of supply in the EU and coordinates response measures during crises.

In the European carbon market, the benchmark contract CFI2Zc1 was down 1.10 euro at 69.17 euros a metric ton.

European benchmark gas contract https://reut.rs/4l47qAh

-Reporting By Susanna Twidale; additional reporting by Nora Buli in Oslo and Marwa Rashad in London; editing by Nina Chestney/Reuters