European Gas Prices Surge After Fire

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European natural gas prices surged on Friday after a fire at a Gazprom condensate plant forced the Russian gas giant to slash volumes carried by the Yamal-Europe pipeline. Spot gas prices at the Dutch TTF hub exceeded $540/Mcm on Friday, while the TTF month-ahead September contract settled at €44.65/MWh. The fire broke out late on Thursday at Gazprom's Urengoi gas condensate pre-transportation facility in the Yamal-Nenets region, prompting Gazprom to cut flows through the Yamal-Europe export pipeline from 2.1 MMcm per hour to 1 MMcm per hour. The fire had been extinguished by Friday and flow rates increased slightly. European gas prices had already been running at high levels recently because of a combination of factors including planned maintenance work in Russia and Norway and at import terminals in France and the Netherlands. Gazprom's unwillingness to book significant volumes of extra gas transit capacity in Ukraine is an additional factor that contributed to the recent high level of prices in Europe.

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