Gas prices keep climbing in Europe after Israel Hamas war

A picture taken on November 28, 2022, shows a pressure gauge on gas pipes at a GRTgaz compressor station, in Morelmaison, eastern France.
A picture taken on November 28, 2022, shows a pressure gauge on gas pipes at a GRTgaz compressor station, in Morelmaison, eastern France. Copyright SEBASTIEN BOZON/AFP or licensors
By Doloresz Katanich
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Natural gas prices in Europe have been climbing over the past week, as recent world events bring uncertainty to the market. Should the continent be worried about its gas supplies?


European natural gas prices are in a volatile state due to growing concerns whether or not there will be enough supply over the winer, after the crisis in Israel and Gaza and Chevron's operations in Australia are casting a long shadow over the market outlook.

European natural gas benchmark Dutch TTF’s price soared 41% to an eight-month high of €56 per megawatt-hour last week. The price has gone up more than 50% in a month, however, it is still less than half of the price one year ago. 

Global uncertainties are fuelling the increase, after US oil giant Chevron Corp stopped production at its offshore Tamar natural gas field near Israel's northern coast, as the Israeli-Hamas conflict intensifies.

Why shutting down an Israeli gas field could matter for Europe?

The Tamar field is believed to hold more than 300 billion cubic metres of gas, which is the equivalent of the annual European natural gas imports. The field provides 70% of Israel’s energy needs for power generation, according to Chevron. 

A lengthy shutdown would result in a drop in Israeli gas exports to its neighbours, including Egypt, which itself, provides gas export to the European market. 

This year, Egypt's exports are expected to be 7.5 million tonnes, with the majority destined for Europe and Turkey. The country has planned to resume liquefied natural gas (LNG) exports this month.

More bad news are squeezing the market from across the globe

Meanwhile, workers at Chevron Corp's liquefied natural gas facilities in Australia reaffirmed their plan to resume strikes this week while the talks continue. 

An in-principle deal that ended weeks of strikes in September fell apart earlier this month after unions said Chevron had reneged on commitments and vowed to resume strikes at the Gorgon and Wheatstone sites, which supply around 6% of the world's LNG.

European gas prices also jumped following news that the Balticconnector offshore gas pipeline was damaged between Finland and Estonia. The leak resulted in a temporary closure of the pipeline, the repair works could take several months.

Should Europe worry about gas supplies?

The reassuring thing is that gas storage across Europe is at more than 90% capacity, including a large amount of gas inherited from the winter of 2022/23. There are also additional volumes being stockpiled in Ukrainian storage facilities.

There is also a high probability, according to the Copernicus Climate Change Service, that Europe will have a very mild winter, potentially reducing the demand for heating fuels. 

However, as sabotage is suspected of being behind the Balticconnector pipeline leak, concerns have been raised over the vulnerability of European pipeline infrastructure.

And even though the EU is not likely to battle any substantial supply difficulties this winter, the ongoing impact of global gas disruption is going to keep the prices high - a cost that households and businesses will have to shoulder eventually.

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