TTF, NBP jump on UK power outage in volatile session

LONDON (ICIS)–The ICIS TTF October ’21 market closed at another record high of $24.26/MMBtu on 15 September, up 6% from Tuesday’s close, as supply concerns continue to rattle the European gas market.

But the contract traded substantially higher in the morning on Wednesday as European gas and power markets were forced up after electricity supplies were cut from France to the UK.

The November ‘21 TTF contract closed at $24.34/MMBtu, up by 6% day on day.

In an unusual move, the TTF has in recent sessions been trading at a premium to the ICIS East Asia Index (EAX) October ‘21 spot LNG assessment which closed on Wednesday at $22.00/MMBtu.

The TTF was last at a premium to the EAX in March 2021.

At one stage of Wednesday morning, the TTF was trading at over a $4.50/MMBtu premium to the EAX October ‘21 market.

The TTF and British NBP rally in prices was driven by news of a fire at the IFA France-Britain power interconnector site in the UK.

Data from European electricity system operators ENTSO-E showed that the interconnector, which was already running at only 50% of its 2GW capacity due to planned maintenance, supplied 786MW between 00:00-15:00 London time on 14 September and 930MW on 13 September.

A 15 September statement from National Grid reported that 1GW is now unavailable through to 27 March 2022.

National Grid extended the planned outage on the 1GW until 25 September.

The unexpected power outage created additional gas supply tightness in Britain in an already tight market, as this could increase demand for gas-fired power generation, igniting buying action on the spot market.

However, the gas supply crunch could lead more coal generation in the short term.

The British NBP near curve was trading at close to record highs in the morning but lost some ground in the afternoon.

NORD STREAM 2 TIMING

On 15 September, Russian producer Gazprom also released an unexpected mid-month update, stating that gas production was up by almost 18% year on year.

But this supply uptick also comes after the dramatic curtailment in 2020 due to coronavirus-related demand destruction.

Gazprom reported much higher injections into domestic storage than last year, which is one potential factor behind the limited recent pipeline exports to Europe.

Gazprom also noted that heating demand in Russia has also started in 25 regions, almost a week earlier than the previous year.

While Gazprom has reiterated that its newly-constructed Nord Stream 2 pipeline could come online as early as 1 October, the pending regulatory approval by German authorities have weakened the credibility of Gazprom’s pronouncements on the 55 billion cubic metre/year pipeline start.

ASIA COMPETITION

The rise in prices may lead to a rise in European LNG imports, with traders locking in high TTF and associated spot LNG prices but Asia will continue to continue to compete for European cargoes, sources said.

“Asia has to pay for Atlantic volumes, I don’t see any other situation in which Asia stops: they have no choice,” said a trader.

Additional reporting by Ruth Liao