Gas Prices Soar as Indefinite Halt of Nord Stream 1 Kindles Winter Fears

View of pipe systems and shut-off devices at the gas receiving station of the Nord Stream 2 Baltic Sea pipeline in Lubmin, Germany, Sunday, Sept. 4, 2022. (dpa via AP)
View of pipe systems and shut-off devices at the gas receiving station of the Nord Stream 2 Baltic Sea pipeline in Lubmin, Germany, Sunday, Sept. 4, 2022. (dpa via AP)
TT
20

Gas Prices Soar as Indefinite Halt of Nord Stream 1 Kindles Winter Fears

View of pipe systems and shut-off devices at the gas receiving station of the Nord Stream 2 Baltic Sea pipeline in Lubmin, Germany, Sunday, Sept. 4, 2022. (dpa via AP)
View of pipe systems and shut-off devices at the gas receiving station of the Nord Stream 2 Baltic Sea pipeline in Lubmin, Germany, Sunday, Sept. 4, 2022. (dpa via AP)

Dutch and British wholesale gas prices soared on Monday morning, reversing most of a downward trend seen the previous week, after Russian gas deliveries to Germany via the Nord Stream 1 were suspended indefinitely over the weekend.

The British contract for day-ahead delivery sky-rocketed 200 pence, or 133% to 350 pence per therm by 0929 GMT, and the within-day contract gained 50 pence to 350 p/therm.

On the continent, the Dutch TTF day-ahead gas contract was up 54.52 euros, or 29% at 245 euros per megawatt hour (MWh).

Further out, Dutch gas for October, the European benchmark contract, gained 59 euros to 268 euros/MWh.

The British October contract was up 146 pence at 546 p/therm.

Prices reacted to a post-market close announcement on Friday from Russia's Gazprom that an oil leak in equipment of the Nord Stream 1 pipeline, which runs under the Baltic Sea to Germany, meant it would stay shut beyond last week's three-day maintenance shutdown.

"Our TTF day-ahead price view today is for prices to pare last week's losses as Europe braces itself for no Russian gas for the foreseeable future and exacerbates fears of a winter supply crunch," Refinitiv analyst Wayne Bryan said in a morning report.

Fundamental drivers were taking a backseat, with Russian rhetoric not supporting a restart of flows via Nord Stream 1 anytime soon, he added.

The Kremlin has repeatedly blamed Western sanctions for the shutdown.

"The market should rise a lot Monday, but the question is for how much and how long, and to what extent the market had already priced this in," analysts at Energi Danmark said in a note.

Europe is losing close to 1 billion cubic meters of natural gas supply per month due to the loss of Nord Stream 1, Warren Patterson, head of commodities strategy at ING said.

The latest move also increased nervousness about flows via Ukraine as well as the TurkStream pipeline, going forward, he added.

"What is clear is that the more Russia reduces gas flows to Europe, the less leverage they have over Europe," Patterson said.

Analysts at Sweden's SEB bank said they maintained a Russian gas flow scenario of 10-20% of normal capacity during the winter.

"This would partly maximize Russian geo- and energy security political pressure on the EU, and partly provide Moscow with valuable income," they added.

Anticipating rising market volatility, Finland and Sweden reacted immediately over the weekend by promising liquidity guarantees to energy companies.

European gas storages were 81.55% full as of Sept. 3, according to Gas Infrastructure Europe data.

In the European carbon market, the benchmark contract was down 3.49 euros at 74.40 euros a ton.



Investors Weigh Market Risks as Israeli-Iranian Tensions Rise

Traders monitoring the movement of stocks on Wall Street (Reuters)
Traders monitoring the movement of stocks on Wall Street (Reuters)
TT
20

Investors Weigh Market Risks as Israeli-Iranian Tensions Rise

Traders monitoring the movement of stocks on Wall Street (Reuters)
Traders monitoring the movement of stocks on Wall Street (Reuters)

As the conflict between Israel and Iran escalates, investors are analyzing several potential market scenarios, especially if the United States deepens its involvement. A key concern is a sharp increase in energy prices, which could amplify economic consequences across global markets.

Rising oil prices could fuel inflation, weaken consumer confidence, and diminish the likelihood of interest rate cuts in the near term. This may prompt initial stock market sell-offs and a flight to the US dollar as a safe-haven asset.

While US crude oil prices have surged by around 10% over the past week, the S&P 500 index has remained relatively stable, following a brief decline after the initial Israeli strikes.

Analysts suggest that if Iranian oil supplies are disrupted, market reactions could intensify significantly. A serious supply disruption would likely ripple through global petroleum markets and push oil prices higher, leading to broader economic consequences.

Oxford Economics has outlined three possible scenarios: a de-escalation of conflict, a full suspension of Iranian oil production, and the closure of the Strait of Hormuz. Each scenario carries escalating risks to global oil prices. In the most severe case, prices could soar to $130 per barrel, pushing US inflation to nearly 6% by year-end. In such a scenario, consumer spending would likely contract due to declining real income, and any possibility of interest rate cuts this year would likely vanish under rising inflationary pressure.

So far, the most direct impact has been felt in oil markets, where Brent crude futures have jumped as much as 18% since June 10, reaching nearly $79 a barrel, the highest level in five months. Volatility expectations in the oil market now exceed those of major asset classes like equities and bonds.

Although equities have largely brushed off the geopolitical turmoil, analysts believe this could change if energy prices continue to climb. Rising oil prices could weigh on corporate earnings and consumer demand, indirectly pressuring stock markets.

While US stocks have held steady for now, further American involvement in the conflict could spark market anxiety. Historical patterns suggest any sell-off might be short-lived. For instance, during the 2003 Iraq invasion, stocks initially dropped but recovered in subsequent months.

As for the US dollar, its performance amid escalating tensions could vary. It may strengthen initially due to safe-haven demand, although past conflicts have sometimes led to long-term weakness, especially during prolonged military engagements.