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European gas prices surged to their highest this year on Monday following the shutdown of a Norwegian gas processing plant, highlighting the growing importance of Norwegian supplies as Europe drastically cuts imports from Russia.
The price of Europe’s benchmark TTF rose above 38 euros a megawatt-hour on the Intercontinental Exchange, up more than 13 percent, before falling to 36.80 euros.The rise to its highest since early December is the latest sign that the market remains tough even as European gas storage nears record levels.
Norway is currently the largest supplier of natural gas to Europe, accounting for 30% of the European Union’s supplies last year after most pipeline deliveries from Russia were cut following Moscow’s full-scale invasion of Ukraine in 2022. Unplanned supply outages in Norway are increasingly prone to trigger sharp reactions in the market.
The surge in prices comes despite ample gas storage in Europe. EU storage facilities were more than 70% full as of Saturday, the second-highest level on record for this time of year. The European Commission aims to have stores 90% full by November but analysts say they could be full by the summer.
The price hikes “highlight the fragility of Europe’s gas markets and their over-reliance on smaller sources of supply,” said Wayne Bryan, European gas research director at LSEG. “Until storage levels approach EU-mandated levels, European gas prices will remain high and subject to increased price volatility from supply disruptions.”
Prices have been trending higher since late May after Austrian energy company OMV warned that Gazprom could cut off gas supplies following a court ruling against the Austrian company, putting remaining Russian pipeline supplies to Europe at risk.
The power outage in Norway occurred at the Nyhamna gas plant, which has a capacity of 79.8 million cubic metres per day, and will be shut down for an “indeterminate period”, according to Gasco, the state company that manages Norway’s gas transmission system.
“Norway [outage] Events surrounding Gazprom’s customers are the main driver [for] “This threatens to drive down gas prices in Europe,” said Tom Marzek-Manser, head of gas analysis at consultancy ICIS, adding that the outage could reduce Norwegian gas supplies by more than 20 percent.
In Asia, heat waves are boosting demand and drawing more liquefied natural gas to coasts, and European gas prices need to remain high for the region to attract LNG cargoes.
“The tight global LNG supply going into the winter will only make it tighter in the future, but Norwegian and Russian pipeline supplies are the more immediate concern,” Marzek Mansell said.
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