Israel-Palestine conflict sends European gas prices soaring

October 12, 2023 (MLN): European natural gas futures soared amid the Israel-Palestine conflict that unfolded during the weekend, the rally was further extended after Israel ordered Chevron Corp. to halt operations at a major gas field.

Europe’s gas benchmark (Dutch TTF natural gas) is up by 20.5% since last week’s close prior to this weekend’s geopolitical unrest, currently trading at €46.07.

Its benchmark futures recorded the highest gain in two months, settling 15% higher on Monday as the markets opened following the weekend.

UK gas prices also surged, with the UK NBP Natural Gas futures climbing 23.42% to €116.62 per megawatt-hour in the ongoing week.

Israel directed Chevron Corp. to temporarily shut the Tamar offshore gas platform because of safety concerns as fighting between Hamas and the Israeli military raged for a third day.

Supplies from Leviathan, the nation’s other major field, continue, as Bloomberg reported.

Israel exports some gas to neighbors due to discoveries in the Mediterranean Sea during the past two decades.

It wants to steer more shipments toward Europe, which is recovering from its worst energy crises in decades.

Some Israeli gas is shipped to Egypt, which has two liquefied natural gas plants that send some of the fuel to Europe.

The North African nation plans to resume shipments after a summer halt caused by increased domestic demand.

Most of Egypt’s LNG exports went to Europe during the last two years, according to ship-tracking data compiled by Bloomberg.

The conflict zone’s proximity to the Suez Canal — a major shipping route for LNG to Europe — could also weigh on prices, given the continent’s reliance on the super-chilled fuel, said Nick Campbell, a director at Inspired Plc.

Supply risks also mounted elsewhere. Workers at Chevron’s LNG facilities in Australia gave notice Monday to resume strikes, a move that may disrupt flows and send prices higher.

In Europe, a leak was discovered on a pipeline in the Baltic region, sparking concerns about infrastructure security and supply as winter approaches.

The fault was detected early Sunday in an undersea pipeline connecting the Finnish and Estonian grids, which operators closed while investigating the issue.

Though the Baltic market is relatively small, the pipeline connects the new floating LNG import terminal in Finland with Estonia. The region depends heavily on LNG after cutting Russian pipeline gas purchases.

While the incident appears contained, it highlights the vulnerability of undersea infrastructure following blasts on the nearby Nord Stream pipelines a year ago.

With the Northern Hemisphere entering its heating season, the focus is increasingly on any potential disruptions, even with European gas stockpiles at almost full capacity.

“Energy prices seem overly reactive to news still following the crisis, despite EU reserves nearly at 100% already,” said Tim Partridge, director of energy markets at utility consultant Eyebright Ltd.

On the other hand, the conflict in Israel has not yet disrupted the oil supply, with the oil markets seeming largely unaffected by Israel's crisis.

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