European natural gas exceeds 300 euros per megawatt hour, a record since March

The price of natural gas briefly exceeded 300 euros per megawatt hour (MWh) on Wednesday, a level not seen since the historic record recorded in early March, at the start of the Russian invasion of Ukraine.

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After rising to 302.995 euros per MWh, the Dutch TTF futures contract, a benchmark for the European natural gas market, moved to 292.150 euros per MWh, around 4:00 p.m. GMT (6:00 p.m. in Paris), pushed for several sessions due to suspensions of upcoming Russian supply. On Friday, Russian gas giant Gazprom announced a complete suspension of gas supply via Nord Stream 1 for a period of three days, from August 31 to September 2, for reasons of “maintenance“. Prices were also supported by weather conditions in Europe, between droughts and heat waves,which has led to an increase in energy demand for air cooling“, explain the analysts of Societe Generale.

They also cite among the bullish factors the effort of European nations to replenish their stocks. natural gas before winter, an all the more ambitious undertaking “with still weak gas flows through the main gas pipeline supplying Western Europe“. Since the start of the year, the price of TTF has exploded and quadrupled (+315%). On March 7, the contract had reached a record level at 345 euros per MWh. The recent surge in prices has also caused electricity prices to soar for next year in France and Germany, without reaching the historic records reached earlier in the week.

Oil Headwinds

Oil prices were hesitant after the weekly release of crude oil and gasoline inventories by the US Energy Information Agency (EIA). The barrel of Brent from the North Sea, the benchmark for crude in Europe, for delivery in October, gleaned 0.27% to 100.53 dollars, returning to three-digit prices. A barrel of US West Texas Intermediate (WTI) for delivery the same month rose 0.86% to 94.55 dollars. During the week ended August 19, commercial inventories fell by 3.3 million barrels, while analysts expected a decline of 2.5 million. Gasoline reserves, however, remained almost unchanged (-100,000 barrels), while experts expected a more marked decline. Operators have also retained the tumble of almost 10% in demand for gasoline, affecting crude oil prices.

The market also had its eyes on the Iran nuclear deal, as Iran’s foreign ministry said on Wednesday it had received a response from the United States regarding “adjustments“required by Tehran to the proposed agreement submitted by theEuropean Union (EU). The negotiations, which began 16 months ago, aim to save the international agreement concluded in 2015, from which Washington withdrew with a bang in 2018 under the presidency of Donald Trump.

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A positive outcome would result in the lifting of part of the American sanctions against Iran and could allow the return of this country to full export capacity on the oil market. On Tuesday, Saudi Energy Minister Abdelaziz bin Salman said current prices could justify a production cut by OPEC+, the Organization of the Petroleum Exporting Countries and its allies. Iraq hassubscribedto these statements, in a press release published Wednesday on the website of the State Oil Marketing Organization (SOMO), the state agency responsible for marketing Iraqi oil. However, this reduction would not be imminent and would depend on the outcome of the negotiations around the Iranian nuclear agreement.

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