European gas prices soar more than 40% on LNG supply fears

Benchmark Dutch and British gas prices extended their gains for the second day in a row and rose more than 40% on Tuesday morning, as supply fears mounted after Iran and Israel stepped up attacks in the Middle East and Qatar halted production at its Ras Laffan liquefied natural gas plant, the world's biggest export facility.

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 and will have to import more to fill is fast depleting storage.

The conflict in the Middle East has led to the effective closure of the Strait of Hormuz, through which nearly 20% of the world’s LNG transits through, pushing prices up internationally.

The Dutch front-month contract at the TTF hub, a benchmark price for Europe TFMBMc1, was up 18.384 euros at 62.755 euros per megawatt hour (MWh) or around $21.33/mmBtu, by 1028 GMT, ICE data showed, having hit 63.490 euros/MWh the highest level since January 2023.

The British April contract NGLNMJ6 was up 44.36 pence at 158.15 pence per therm, ICE data showed.

"The disruptions come at a critical time for the natural gas market. With the heating season for Asia and Europe nearing its end, inventories are low, particularly in Europe. This will make restock increasingly difficult for consumers over the coming months," Daniel Hynes, senior commodity strategist at ANZ Research said.

"Alternatives are few and far between. The US could boost LNG exports; however, this is unlikely to offset the supply from Qatar in the near term" he added.

Analysts at BMI, a Fitch subsidiary, said they expect Dutch TTF prices to remain elevated above 40 euros/MWh followed by rapid retracement heading into Q2, as geopolitical risk premiums fade.

European LNG prices jumped as well, with S&P Global Energy assessing the April DES Northwest Europe (NWE) marker at $15.479/MMBtu on March 2, a 56.61% day-on-day increase.

In Asia, The Japan Korea Market (JKM), widely used as the Asian LNG benchmark, rose to $25 per million metric British thermal unit (mmBtu), from $10.8 on Friday.

"Asian demand centres are likely to continue outbidding European buyers for spot cargoes from the Atlantic Basin, particularly from the US and West Africa, to meet domestic consumption requirements," said Aly Blakeway, head of Atlantic LNG at S&P Global Energy,

In the European carbon market, the benchmark contract CFI2Zc1 was up 2.02 euro at 72.59 euros a metric ton.

-Reporting By Marwa Rashad; editing by Susanna Twidale/Reuters