Italian September price strong on last minute injection rush and TAG cuts
The summer looks to be finishing strongly in Italy after the country has been long nearly all season. Although the PSV was extremely quiet and many traders are still on holiday, September traded on Tuesday at EUR 19.00/MWh in 2,000 GJ/day at the hub, where it has been for around two weeks now. The Tuesday price was at a premium of around EUR 5.60/MWh above the TTF and traders said there was the potential for the PSV to dislocate because all capacity south to the Italian border was now being maximised.
The rush to get gas to Italy after what has been a generally well-supplied summer, may partly be spurred by fears that the storage injection season will finish early due to ongoing maintenance at the Settala site. “There is a risk that it [the injection rate] will be cut in the second half of September,” one trader said. Companies also now have a clearer picture of their total position in Stogit’s storage sites and those who are still short will be wanting to balance quickly.
Heavy cuts in capacity on the TAG pipeline from Russia in September are also supportive of the September price in Italy. Capacity is cut by about 20% in the first seven days, according to Snam. This rises to 35% from 10th-19th September. It is not yet certain whether there is further maintenance at Baumgarten or upstream of the Austrian hub that could reduce supplies beyond the capacity cuts.
The marginal spot supply on the PSV normally comes through either TAG to the East or the TENP/Transitgas route to the West. Now that the western route has been prioritised for September there may not be much more marginal gas available.
Traders said there were no close bid/offer spreads to be found at Wallbach on the Swiss-German border this week.
Nor was there any interest in winter trading. There is usually a reluctance to sell winter gas forwards at the PSV – particularly Q1 ’08 – as traders who have year-long import contracts often do not have much flexibility and prefer to sell the whole year rather than get stuck with summer gas. There is also a growing worry that Settala may not be full in time for peak demand in January and the supply/demand balance already had the potential to be tight this winter if there is cold weather. LB
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