We recently wrote about Europe’s soaring, record gas prices as Russian nat gas supplies have been suspiciously low, amid growing concerns about Europe’s inventory levels as the winter approaches.
The price uptrend was finally broken yesterday – if only for the time being – when as Bloomberg’s Stephen Stapczynski explains, Dutch nat gas futures prices (TTF) plummeted by 10% after data suggested Nord Stream 2 started flowing. But that data turned out to be incorrect, and prices quickly rebounded recovered.
But then European nat gas prices plunged once again today, and again it was on the prospect of more Russian supply, after Gazprom said it’s likely to deliver 5.6bcm of gas this year via the Nord Stream 2 pipeline. As Stapczynski updates, “possible flows keep spooking the market and prices are now down ~11% from the record high on Monday.”
Then again, a little bit of context on the recent Dutch natural gas price rally courtesy of the Bloomberg reporter:
And if the gas doesn’t start flowing for real, we expect even higher highs. This could be challenging because hurdles remain before Nord Stream 2 can start. Stapczynski quotes Oxford Energy’s Katja Yafimava who said that “the first line of NS2 might be getting tested. But it is too much of a wishful thinking on part of the market to believe that the line is ready for commercial operationsâ
Russia, naturally, presented a different view: “assuming the pipeline will reach utilization of 70% from the design capacity in December and its gas-in will be gradual, Gazprom probably anticipates full-fledged supplies can start approximately in Octoberâ
Meanwhile, ICIS expects Nord Stream 2 to flow 8.1 bcm in 2021:
#Gazprom has said it hopes to deliver 5.6bcm of #natgas via #NS2 to #Europe in 2021. Thatâs not much lower than the 8.1bcm @ICIS_energy has been predicting. All part of the ICIS Global LNG Supply & Demand Forecast that covers every #LNG market on a rolling 24-month horizon. #ONGT pic.twitter.com/tP4nWCKzvc
— Tom Marzec-Manser (@tmarzecmanser) August 19, 2021
One final point via Bloomberg: “Before carrying the first gas flows to Europe, Nord Stream 2 needs to obtain insurance and certification, a task made difficult by U.S. sanctions that restrict providing these services to the project.”
In short: if Russia is indeed preparing to ship much needed product to Europe, then the price of nat gas could plummet. Alternatively, should Russia continue to toy with the continent as we enter fall, and especially winter, the current record prices will seem like Bitcoin in 2014. A good time to buy straddles?
