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Gas prices in Europe to face additional upside pressure

Oil&Gas Materials 19 November 2021 11:12 (UTC +04:00)
Gas prices in Europe to face additional upside pressure

BAKU, Azerbaijan, Nov.19

By Leman Zeynalova – Trend:

Gas prices in Europe are expected to face additional upside pressure, Trend reports with reference to Fitch Solutions.

“The delay in certification of Nord Stream 2 raises the risk of higher prices should this upcoming winter prove colder than normal. We had expected the operation of the pipeline to add additional volumes of natural gas however, this relief will now be delayed adding to the additional price upside pressure,” said the company.

The core view of Fitch Solutions for NBP prices to rise from September with high volatility remains in play.

“The start of increased seasonal demand will only add to upside pressures seen this week on the political front leading to high risk of further price spikes. We expect prices to ease near the close of Q1 2022 as weather related demand eases and imports into the region stabilize though the risk of extreme weather-related events remains high given the notable episodes over recent winters. European natural gas prices registered a steep rise over the last week as concerns around seasonally low storage levels are magnified by Nord Stream 2 delays and political turmoil on the Polish and Belarusian border,” said the company in its latest report.

Last week, the Belarusian leader openly threatened to shut down the Yamal pipeline that runs through Belarus to Poland, with a shipment capacity of 33bcm annually.

“Although we think this is unlikely given Russia’s dependence on revenue from the key gas pipeline. However, the potential for diplomatic relations between Poland and Belarus to deteriorate highlights the fragile security of the Yamal pipeline, especially once Poland’s contract with Gazprom expires
in 2022. With regional weather forecasts turning from mild to colder than normal over the next several weeks in an early test of demand on storage levels, we see our views for high prices playing out as we enter the depths of Winter,” the report reads.

Dutch TTF front month prices have risen 22.6 percent since last week to hover near EUR92/MWh, but still well below the all-time high of EUR117/MWh registered on October 5th. UK NBP front month prices have also risen in response to recent events registering a gain of 33 percent since last week to GBp239/therm but still well below all-time daily close high set on October 6th of GBp276/therm.

“The weather forecast for Europe looks to remain fairly typical to start December although concerns for natural gas storage still remain prevalent among buyers. Should temperatures remain mild or even broadly normal for December and storage remains broadly flat would should see price pressures ease,” said Fitch Solutions.

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Follow the author on Twitter: @Lyaman_Zeyn

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