Europe’s natural gas futures jumped after a leak was discovered on a pipeline in the Baltic region, sparking concerns about security of infrastructure as the winter approaches.
The benchmark contracted surged as much as 8.6% to trade above €40 a megawatt-hour on Monday. A suspected leak was detected overnight on Sunday in an undersea pipeline connecting the Finnish and Estonian grids, which its operators closed while investigating the issue.
While the current incident appears contained for now, it highlights the vulnerability of undersea infrastructure following the blasts on the nearby Nord Stream pipelines a year ago. With the northern hemisphere entering its heating season, it’s become more vulnerable to disruptions in supply, and it also faces potential risks from protracted maintenance and labor strikes in Australia, a major exporter of LNG.
Gas also tracked advances in crude oil prices, which surged after a deadly attack on Israel over the weekend. The incursion threatens to inflame tensions in the Middle East. Some Israeli gas is shipped to Egypt, which has two LNG producing plants that send some of the fuel to Europe.
While the Baltic market is relatively small, the pipeline affected by the leak connects the new floating import terminal for liquefied natural gas in Finland with Estonia. The Baltic region heavily depends on LNG after cutting Russian pipeline gas purchases.
Gas is not central to Finland’s energy supply, accounting for just 3.5% of the Nordic country’s energy mix in the first half of this year.
Front-month gas in the Netherlands, Europe’s benchmark, gained 7.6% to €41.15 a megawatt-hour by 9:42 a.m. in Amsterdam.
--With assistance from Kati Pohjanpalo.
