Energy markets left reeling after Baumgarten explosion

12 December 2017 15:11 Source:ICIS

• Italian PSV gas Day-ahead soars to €60/MWh

• Italian power Day-ahead reaches €110.98/MWh on GME exchange

• Italian January ’18 power price hits highest level since December 2012

• British NBP gas Day-ahead spikes to 86p/th

• UK Day-ahead electricity Baseload jumps to €70/MWh

• UK power Q1 ’18 Baseload reaches €62.80/MWh


European energy markets were left reeling on Tuesday, with gas and power prices spiking after an explosion at Austria’s Baumgarten gas network point in the morning stopped gas flows.

Prices for next-day delivery in gas and power markets jumped, as well as January and Q1’18 contracts as traders sought to insure against a prolonged impact. All eyes are now on Gas Connect Austria, the operator of the station, as to how long gas transit supply from eastern Europe will be affected.

Domestic demand in Austria should be covered, according to Gas Connect Austria, but transit flows via Austria to the south and southeast will remain impaired until further notice.

Italy is heavily reliant on gas that transits Austria and into the PSV system, and the country’s energy ministry triggered a state of alert for the already tight system as a result, boosting prices.

The bullish sentiment also boosted UK energy prices, which were already climbing due to separate outages.

Italy

Italian natural gas prompt contracts rocketed on Tuesday, as flows via Austria are one of the country’s main sources of supply.

Nominations of Russian volume via Austria into Italy were for 113mcm on Tuesday morning, but dropped to 14mcm by 09:00, according to grid operator Snam Rete Gas.

This exposed the system to a 92mcm shortage and triggered an emergency state for the system (see separate story).

The PSV Day-ahead contract was trading as high as €60.00/MWh at 11:50, nearly €35.00/MWh above the front-month.

Italian power prices also shot up, as gas-fired generation makes up about 45% of national electricity production.

The electricity Day-ahead last traded at €105.00/MWh, but exchange GME’s delivery proved even stronger at €110.98/MWh. The Week 51 ’17 contract gained €11.38/MWh from Monday’s close to trade as high as €75.00/MWh, before sliding to €72.50/MWh.

The January ’18 product hit its highest level since December 2012 for a front month at €71.00/MWh, then dropped to €69.15/MWh.

The Q1 ’18 contract also hit a front-quarter four-year high at €65.00/MWh, up by €4.45/MWh from the previous close, before falling to €63.80/MWh.

UK

The British NBP gas market was already in a bull run that started on Monday, following an announcement from chemicals major INEOS that it had discovered a problem with the Forties Pipeline System (FPS).

While the FPS is responsible for transporting oil, most notably from the Brent field, it also delivers gas.

France’s Total said flows through the 10mcm/day Elgin-Franklin asset would be forced to shut from 21:00 on Monday due to the FPS issue.

Shell announced that 5.6mcm/day of throughput at the Bacton SEAL sub-terminal would be unavailable. This likely relates to Shell’s Shearwater complex, which pipes gas to Bacton SEAL and other products via the FPS.

Flows into neighbouring sub-terminal Bacton Perenco were also reduced.

Gas production from the Britannia facility ceased late on Monday due to the FPS shutdown, operator ConocoPhilips said. While the issue is ongoing 5mcm/day of capacity will be unavailable.

The FPS outage had implications on Norwegian field Valemon, which delivers gas into St Fergus NSMP via the Vesterled pipeline.

Other outages in Norway led to a perfect storm of supply side issues when the Austrian explosion was announced.

NBP prices were extremely volatile, with the within-day contract trading as high as 96p/th and as low as 62.75p/th.

The Day-ahead was lifted as high as 86p/th just before 10:00, up by more than 22p/th from the close, although it slid to 74p/th in the early afternoon.

In the power market the UK Day-ahead Baseload contract jumped from £61.00/MWh just before 09:00 to £70.00/MWh half an hour later.

“People were still trying to process a very large unexpected shock to the system, and then you heard that news from Austria. A lot of stops would have been triggered,” one trader said, referring to positions automatically taken in response to certain price levels being hit.

The near curve was also volatile, with Q1 ’18 Baseload opening at a similar price to Monday’s close then moving up to £59.40/MWh at 09:00 and reaching a peak of £62.80/MWh at 09:45, before moving down a touch.

“This must be a one-in-a-million chance of everything happening at the same time,” another source at an energy-to-business supplier said. “Everything is spooking everything else.”

energyinfo@icis.com

By ICIS Staff