Prices Rise as Attacks in Middle East and LNG Supply Fears Continue

By Nina Chestney

LONDON, March 17 - Benchmark Dutch wholesale gas prices rose on Tuesday morning, in line with the crude oil market, as the U.S.-Israeli war on Iran continued and with little prospect of unlocking oil and gas exports through the Strait of Hormuz in the short term.

The benchmark Dutch front-month contract at the TTF hub TFMBMc1 rose by around 1.5 euros to 52.41 euros per megawatt hour (MWh) by 0822 GMT, ICE data showed.

The British front-month contract NGLNMc1 was around 4.00 pence higher at 133.47 pence per therm.

Iran launched fresh attacks on the United Arab Emirates on Tuesday. Operations at the United Arab Emirates' Shah gas field remained suspended following a drone attack, while a fresh attack caused a fire in the port of Fujairah, a key export terminal where oil loading by state firm ADNOC has been halted.

The disruption to shipping via the Strait of Hormuz and Qatar's LNG facility shutdown has impacted around 20% of global LNG trade.

"There is new capacity ramping up in the United States this year, but at just 15 billion cubic metres (bcm) of annual capacity, it falls short of the 110 bcm of annual production currently disrupted. For gas and LNG markets, the only real solution in the short term is to balance the market with demand destruction," said analysts at ING.

Even if Strait of Hormuz flows remain cut off until the end of March and upstream production, refineries and LNG facilities then started to slowly ramp up, it would only be by the start of the third quarter that there would be a return to near-normal flows, they added.

"The recent spike in the benchmark TTF price reflects concerns about tighter supplies but does not indicate panic buying. While further price rises are possible in the months ahead, the current situation for Europe is not as dire as the Ukraine conflict was," said analysts at UniCredit.

Nevertheless, if the Strait of Hormuz remains closed for an extended period, TTF prices could surge to 90-100 euros/MWh, they added.

In the European carbon market, the benchmark contract CFI2Zc1 was down 2.02 euros at 66.98 euros a metric ton.

The European Union will take steps to ease the impact of surging energy prices caused by the U.S.-Israeli war against Iran, European Commission President von der Leyen said on Monday, while stopping short of major market interventions such as capping gas prices.

In a letter to EU leaders before a Brussels summit on Thursday, she laid out plans focused on making more carbon-emissions permits available in the bloc's market and providing more financial aid to industries.