Europe’s natural gas futures jumped after a leak was discovered on a pipeline in the Baltic region, sparking concerns about infrastructure security and adding to supply risks as the winter approaches.
(Bloomberg) — Europe’s natural gas futures jumped after a leak was discovered on a pipeline in the Baltic region, sparking concerns about infrastructure security and adding to supply risks as the winter approaches.
The benchmark contract surged as much as 9.7% to trade above €41 ($43) a megawatt-hour Monday. A suspected leak was detected early Sunday in an undersea pipeline connecting the Finnish and Estonian grids, which its operators closed while investigating the issue.
While the current incident appears contained for now, it highlights the vulnerability of undersea infrastructure following the blasts on the nearby Nord Stream pipelines a year ago. With the northern hemisphere entering its heating season, focus is increasingly on any potential supply disruptions in the wake of last year’s energy market volatility, even with European gas stockpiles at almost full capacity.
“Energy prices seem overly reactive to news still following the crisis despite EU reserves nearly at 100% already,” said Tim Partridge, director of energy markets at utilities consultancy Eyebright Ltd.
Gas also tracked advances in crude oil prices, which surged after a deadly attack on Israel over the weekend. The incursion threatens to inflame tensions in the Middle East. Some Israeli gas is shipped to Egypt, which has two liquefied natural gas producing plants that send some of the fuel to Europe.
While the Baltic market is relatively small, the pipeline affected by the leak connects the new floating LNG import terminal in Finland with Estonia. The region depends heavily on LNG after cutting Russian pipeline gas purchases, but gas only accounted for 3.5% of Finland’s energy mix in the first half of this year.
Front-month gas in the Netherlands, Europe’s benchmark, gained 9.3% to €41.80 a megawatt-hour by 11:31 a.m. in Amsterdam. The UK equivalent also surged.
–With assistance from Kati Pohjanpalo.
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