In addition, the latest monthly Oil Market Reports from the EIA and most recently from the IEA points to a reduced risk of higher prices as moderating demand growth due to another Covid wave and weaker industrial activity, partly due to higher oil and gas prices, combined with a steady rise in supply will support a balanced market sometime in early 2022.
Against this potential price negative developments, we find support from a renewed surge in European and Asian gas prices driving increased demand for fuel products such as diesel, heating oil and propane at the expense of gas. During the past three trading sessions, the price of Dutch TTF benchmark gas has jumped by one-third to €100/MWh or $33/MMBtu, more than six time higher than the long-term average price.
Initially the rally was driven by disappointment over Gazprom’s lack of interest in booking additional pipeline capacity for December via key supply lines through Poland and Ukraine. However, most of the damage was done following yesterday’s announcement that the controversial Nord Stream 2 pipeline would face further delays. This after German regulators suspended the certification process while waiting for the operator to set up a German subsidiary that would own the section German section of the pipeline. In the latest twist, the German regulators on Wednesday said the suspension of licensing NS2 could delay commissioning to March 2022.
Adding insult to injury, short-term weather forecasts point to below seasonal temperatures in Europe into early December while Russia looks set to be warmer. Potentially and under normal circumstances a good incentive for Gazprom to ship more gas to Europe.