The Dutch TTF futures contract touched 295 euros per megawatt-hour, a level not seen since the highly volatile sessions in the first weeks of Russia’s invasion of Ukraine in mid-March.
Natural gas prices continued to surge on Monday, still propelled by the prospect of a temporary disruption in Russian gas deliveries via Nord Stream 1, rekindling fears that the energy crisis could trigger a recession in Europe.
The Dutch TTF futures contract, the benchmark for the European natural gas market, touched 295 euros per megawatt hour (MWh), a level not seen since the very volatile sessions of the first weeks of the Russian invasion of Ukraine in mid-March. .
Russian gas giant Gazprom announced on Friday that its deliveries of Russian gas to Europe through the Nord Stream 1 gas pipeline would be interrupted for three days, from August 31 to September 2, for “maintenance” reasons.
An “obvious attempt to exploit Europe’s dependence on Russian gas”, according to Ludwig Möhring, director of the Association of German Oil, Gas and Geothermal Producers (BVEG).
If “in itself, a brief closure of the pipeline would not make a big difference”, Ludwig Möhring explains that this news highlights two risks: that Russia “wrongly claims that it cannot reopen the pipeline” on the pretext of a new technical problem, or to close its other gas pipelines supplying Europe.
Bjarne Schieldrop of Swedish bank Seb predicts an “extremely difficult” energy situation in Europe this winter, arguing that Russia could play “all out” by further lowering natural gas exports, especially “every once the weather forecast is really cold.
“The European natural gas and electricity markets are down, liquidity is evaporating,” added Mr. Schieldrop, interviewed by AFP.
Mechanically, the prices of electricity for delivery in early 2023 in Germany were propelled on Monday, to exceed 700 euros while the historical norm is 40 euros per MWh, according to Mr. Schieldrop. For electricity in France at the start of next year, the MWh reached 840 euros.
Therefore, “recession in Europe is a certainty”, concluded, in a note, Edward Moya, of Oanda.
An intervention by OPEC?
In the United States too, natural gas is soaring, and its price rose Monday to 9.982 dollars per million British thermal unit (BTU), Anglo-Saxon unit of measurement, a first for 14 years.
But this movement is mainly linked to the heat wave experienced by several American regions during the summer, explained Andy Lipow, of Lipow Oil Associates.
It increased energy needs, especially for air conditioning, while low water levels at several hydroelectric facilities in the West limited renewable electricity production.
Reserves, which are currently 12% lower than their average level for the last five years, have thus not been able to be replenished, which has created tension on the market as autumn approaches.
Compared to the extreme prices of natural gas and electricity in Europe, crude oil now seems “exceptionally cheap”, notes Bjarne Schieldrop.
Extreme gas prices create a situation with an “extremely destructive effect on the European economy”, raise fears for demand and thus weigh on crude prices.
After plunging at the start of the day on Monday, prices nevertheless recovered, to end up close to equilibrium, thanks to statements made to the Bloomberg agency by the Saudi Minister of Energy, Abdulaziz bin Salman.
The official estimated that the current volatility of the oil market and the fall in prices, which prematurely integrate, according to him, a marked economic slowdown, could justify a drop in production by the Organization of the Petroleum Exporting Countries (OPEC+). .
The barrel of Brent crude from the North Sea, the benchmark for crude in Europe, for delivery in October fell only 0.24%, to close at 96.48 dollars. Its American equivalent, the West Texas Intermediate (WTI), lost 0.59% to 90.23 dollars a barrel.
For Andy Lipow, an OPEC production cut would not be enough to significantly boost oil prices, because “Europe is on the way to recession and the economic impact will be felt around the world. and weigh on demand, and therefore on prices.
Another factor of support for black gold, “the American response to Iran which is long overdue” in the Iranian nuclear file, a week after Tehran submitted its proposals to the last offer presented by the European Union for attempt to salvage the 2015 international agreement.
“The market is increasingly skeptical of a deal,” said Bart Melel of TD Bank.