On Monday local time, the European people once again recalled the fear of being dominated by severe natural gas price fluctuations. Although the severity of the latest event appears to be insignificant compared to the Nord Stream incident, it once again highlights Europe's high dependence on imported natural gas and the resulting severe price fluctuations. Product structure, 10-30 billion yuan products operating income of 401/1288/60 million yuan respectively.

At the time of publication, the European benchmark Dutch TTF natural gas futures contract rose more than 8%, to 37 euros/mWh, reaching a new high for the year, with intraday gains once exceeding 12%.

(TTF natural gas futures near-month contract daily chart, source: TradingView)

What happened?

The problem this time occurred in Norway, Europe's largest natural gas supply source. The Nyhamna natural gas processing plant in Norway reported an unexpected shutdown event on Monday. At the same time, the natural gas flow transported from the North Sea to the Easington terminal in the UK by Norway also plummeted to 0. One-third of the UK's natural gas supply relies on this pipeline for import.

(Source: Gassco)

According to the latest news before the publication, Gassco, the operator of Norway's natural gas pipeline, disclosed that the cause of the shutdown event was a crack in the natural gas pipeline discovered at the Sleipner Riser platform near Norway. Gassco also stated that although it is unclear how much time it will take to repair this problem, the current situation seems "not dangerous."

Alfred Hansen, the head of Gassco's pipeline system operations, told the media that this event had a significant impact on supply. Although there are options to bypass the Sleipner Riser platform, this is also a "time-consuming and risky" process in terms of gas transportation.

According to Gassco's data, affected by this event, Norway's natural gas supply on Monday dropped sharply from 300 million cubic meters/day last Friday to 255 million cubic meters/day.

Considering that the operator of the Sleipner Riser platform is the Norwegian national oil company, a Gassco spokesperson stated that it is cooperating with the oil company to develop repair and compensation plans to deliver more production to Europe as much as possible.

According to public information, the Nyhamna plant can process up to 79.8 million cubic meters of natural gas per day, corresponding to a processing capacity of up to 72.5 million cubic meters at the Easington terminal in the UK. Hansen stated that the shutdown on Monday actually resulted in a production capacity loss of 56.7 million cubic meters. According to official website information, the shutdowns of the two plants will continue to impact on Tuesday.

Intractable 'Natural Gas Panic'

It is worth mentioning that when the gas pipeline accident occurred in Norway today, Europe was not in a state of gas shortage. Under the background of slow recovery of industrial demand, the current natural gas inventory level in Europe has reached 70%, which is also the second-highest data for the same period in history. As for the European Commission's goal of reaching a natural gas storage level of 90% by November, most analysts still believe that this level can be achieved this summer.

Since Russia's gas supply to Europe decreased sharply, Norway is now the largest natural gas supplier to Europe, accounting for about 30% of the region's supply last year. In addition to Norway's pipeline natural gas, Europe is also heavily importing liquefied natural gas from the United States and Qatar.

Wayne Bryan, director of European natural gas research at the London Stock Exchange, also stated that the anomalies in the European natural gas market highlight the vulnerability of the market and the excessive dependence on a few supply sources. Before the gas storage inventory level reaches the EU target level, the price of European natural gas will remain high and will be easily affected by supply interruptions.

Since the end of May this year, the price of natural gas in Europe has been rising. The driving factor before was that OMV, the energy group of Austria, warned that the prospect of Russia continuing to supply pipeline natural gas was uncertain due to a local court ruling in Austria.

It is worth mentioning that with the increase in electricity demand for air conditioning in Asia due to the high temperature heat wave, the increase in demand for natural gas imports has also pushed the competition for natural gas between Asia and Europe to further intensify.