ITALY OUTLOOK: Early end of TAG outage pressures PSV Day-ahead

Source: Heren


LONDON (ICIS)--An unplanned outage which was expected to reduce capacity on the Austria-to-Italy TAG pipeline until 21 December ended at 11:00 Rome time on Friday, one week earlier than planned, the operator told ICIS.

The PSV prompt premium to the Dutch TTF is likely to plunge in week 51 on the back of this sooner-than-expected resolution, higher withdrawal capacity and a busy LNG schedule.

This could limit the need for expensive short-term imports via Switzerland, which would allow the PSV prompt premium to the TTF to drop below the cost of transport capacity from north Europe. This is around €1.80/MWh.

The outage had reduced the 110mcm/day technical export capacity to Italy on the pipeline by around 20mcm/day since 6 December.

This and higher weather-related demand caused the PSV Day-ahead contract to spike as traders priced into the product the need for short-term imports from the more expensive route from north Europe through Switzerland.

The PSV Day-ahead was trading at around €26.45/MWh on Friday morning, €1.64/MWh down compared to the previous assessment, trades received by ICIS showed.

According to urgent market messages published on the TAG website, a 21% restriction of TAG export capacity will be in place from 07:00 to 17:00 on 17, 18 and 19 December due to short-term tests at the compressor station. Urgent market messages for TAG can be found here .

A busy LNG schedule is likely to counterbalance the bullish effect of the three-day maintenance.

Four vessels are scheduled to dock at Italian terminals by 19 December, LNG Edge shows.

Higher withdrawal limits for the second part of December are also likely to feed into the bearish picture pressuring short-term contracts and offset the TAG reductions.

TAG delivers Russian gas to Italy via Austria and is one of Italy’s two most flexible sources of supply together with the more expensive Swiss Transitgas.