Gas prices may jump 18% if Russia cuts Austrian supply – analyst
(Montel) Europe’s benchmark front-month TTF gas price could “easily” jump by EUR 5-6/MWh if Gazprom ends supply to Austrian gas major OMV, an analyst told Montel.
Writing by: Andrés Cala
OMV warned last week it may have to stop direct payments to Russia’s Gazprom Export due to legal issues. If this legal issue was confirmed, it could set a precedent and affect other EU companies importing Russian gas, said analysts.
“If you get an interruption tomorrow, you can easily see prices jump EUR 5-6/MWh,” said Jacopo Casadei, gas analyst with Energy Aspects, adding that the timing of a potential cut was still unclear. This is despite former Austria energy regulator Walter Boltz telling Montel a cut could come within weeks.
The TTF front month was last EUR 0.07 higher on the day at EUR 33.60/MWh.
“The moment Gazprom does not receive payment it is likely they’ll cut deliveries altogether,” said Casadei, adding that it was “one of the biggest risks to European balances”.
OMV has said it would lose about 6bcm/year of gas if Gazprom cut supplies, although if the legal issues affected supplies to Slovakia as well, the volume could reach 8-10bcm, said Casadei.
Additionally, Austrian gas prices would offer a premium of EUR 2-3/MWh to German gas prices, he estimated, citing German taxes on gas export of about EUR 2.50/MWh.
However, the risk of Russian flow cuts was already priced in, said Mauro Chavez, head of natural gas and LNG research at consultancy Wood Mackenzie.
No rationing risk
“On paper, there is enough pipeline capacity that should be able to cover it but from energy security it really tightens the supply picture and makes Europe more reliant on LNG and Norwegian flows,” said Casadei.
Chavez agreed. “There is no risk of demand curtailment in Europe, even if Russia cuts supply to Austria.”
Austria and other affected countries would be able to secure the gas to offset the lost supply but any price jump would lead to more demand destruction in Europe and Asia, said Chavez.
“Gas markets could manage but not European industry,” he said. “Some industries will not survive a second blow of Russian supply curtailment.”
Italy route
Most of the extra supply to cover lost Russian flows would be secured via Italy from its North Africa imports due to the German levy on gas exports, and the remainder from Germany, analysts said.
Energy Aspects has not included a risk of cuts in its current base case and forecast underground storage to reach the 90% full target by the end of September, ahead of the EU’s 1 November deadline.
EU gas storage was last seen at 69% full, 1.3 percentage points higher year on year.