Double-Bottom? European NatGas Jumps On Russia Missile Attacks On Ukraine’s Energy Grid

European natural gas prices have constructed what appears to be a double-bottom, around the 25 euros a megawatt-hour level. Prices are moving higher Monday morning as a war risk premium returns following Russia’s massive aerial attack on Friday in what Ukrainian officials said was the biggest bombardment on its energy infrastructure since the start of the war. 

The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, jumped as much as 8.1% on Monday before settling 6.7% higher—the largest daily advance since January 3, according to Bloomberg data. Prices have been halved to 25 euros after peaking around the 53 handle last October, mostly due to above-average weather producing large inventories across Europe during the winter season. 

On Facebook, Oleksiy Chernyshov, chief executive officer of state-run Naftogaz Ukrainy, said Russia unleashed drones and missiles on Friday and over the weekend that damaged Ukraine’s power and gas facilities. He noted that missiles struck an underground NatGas storage facility in the western part of the country; despite this, pipelines weren’t severely disrupted, and supplies to foreign customers were all met. 

Bloomberg noted, “Ukraine has been advertising itself as a storage haven for European traders awash with gas. Almost 80% of its underground capacity is located in the west of the country, far from the front line and in areas that have suffered relatively limited airstrikes during Russia’s invasion, now into its third year.” 

Traders are placing a rising war risk premium on energy markets as a new phase in the Russia-Ukraine war accelerates over who can destroy each other’s energy infrastructure the fastest. Prices are also moving higher on news that the Freeport LNG export plant in Texas reduced flows over the weekend. Norway also experienced an unplanned outage and reduced pipeline NatGas exports. 

“Freeport and Ukraine attacks on Russian energy infrastructure are probably the main drivers,” Ole Sloth Hansen, head of commodity strategy at Saxo Bank A/S, wrote in a note. He said there are no bearish drivers” in the market today. 

Hansen noted that EU NatGas prices are tracking higher on rising geopolitical risk with Brent crude prices.