Qatar's liquefied natural gas production halt causes European natural gas prices to soar

Investing.com - On Tuesday, European natural gas prices surged over 28%, as the impact of Iran attacking a key facility in Qatar affected the market, intensifying investor concerns about global supply shortages.

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The Dutch TTF near-month contract jumped more than 24%, to €55.40 per megawatt-hour, hovering near its highest level since 2023.

The main reason for this price surge is the shutdown of Qatar’s state-owned energy company’s liquefied natural gas production, which could effectively cut off a major source of global fuel supply.

QatarEnergy announced on Monday that it would halt liquefied natural gas and related product production after two of its facilities were attacked. Following the announcement, TTF soared to a one-year high.

Market concerns about the Strait of Hormuz, a critical waterway through which most of the world’s oil and natural gas are transported, are also rising. An senior official from Iran’s Islamic Revolutionary Guard Corps vowed to attack any ships attempting to pass through the strait.

This could pose a significant problem for Europe, which imports about 5% of its natural gas from the Middle East. Goldman Sachs analysts said TTF could rise by 130% compared to last week’s trading prices, potentially bringing natural gas prices back to levels seen after the outbreak of the Ukraine war in 2022.

Goldman Sachs analysts wrote that the uncertainty over the duration of Qatar’s production halt, the reliability of flow through the Strait of Hormuz, and Europe’s higher-than-expected gas demand last winter will “push TTF prices temporarily higher.”

According to The New York Times, citing the Center for Strategic and International Studies, further restrictions on Asian natural gas supplies could increase demand for alternatives produced in the U.S. and other regions. The report states that even after QatarEnergy resumes production, European natural gas prices may continue to rise due to already low storage levels.

Laurence Booth, head of global markets at CMC Markets, said traders are preparing for the possibility of prolonged conflict and limited energy exports.

In the U.S., a major producer and consumer of natural gas, prices rose more modestly on Tuesday.

Additionally, countries across Asia have indicated that if the war continues, they will diversify their liquefied natural gas import sources and turn to spot markets for fuel. Asian benchmark LNG prices also surged sharply on Monday.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.