Outage-linked gas price spikes due to sentiment more than supply
Natural gas price spikes in mainland Europe in August have been linked more to perceived lack of supply than actual drops in physical flows following Norwegian outages.
There have been nine outages on Norwegian infrastructure in August so far, of which two were ongoing on Tuesday, with an unplanned outage at Gullfaks and a planned outage at an unnamed field both scheduled to start on Wednesday. The Gullfaks outage, which has a within-day impact of 5.7 million cubic metres (mcm)/day and is expected to last until Saturday, was only announced late on Friday. They have led to price spikes across Europe, exacerbated by a lack of LNG in Europe and low gas stocks, as well as by the numerous extensions on other outages.
The price spikes have not necessarily correlated with drops in Norwegian deliveries to mainland Europe, as the outages have generally hit exports to Britain first.
For instance, on 9 August the TTF Day-ahead gained €0.5125/MWh but Norwegian flows to the Netherlands were actually up by a rate of around 4mcm/day, according to data collated by ICIS.
“No-one expected the [Norway] situation,” one trader said of a 12.4mcm/day outage at Heimdal which hit European markets on 7 August, adding that markets had been very short in the previous week, heightening concerns.
Other factors leading to system tightness in Europe are a lack of LNG deliveries and low levels of gas in store resulting in an increased need for storage injections in August and September. European storage sites are currently around 66% full, according to data collated by ICIS.
Another factor driving price spikes is the uncertain duration of outages.
“When an outage appears we don’t know how long it will continue,” one trader said. “The end dates are being pushed back further and further.”
As an example, the Heimdal outage began on 4 August and was only expected to last 12-24 hours, according to operator Gassco. In the following week, the operator revised the outage 14 times, altering the volume impact and duration. The outage eventually ended on 12 August. firstname.lastname@example.org