European natural gas prices rebounded as traders consider whether demand will finally pick up later this year.
(Bloomberg) — European natural gas prices rebounded as traders consider whether demand will finally pick up later this year.
Benchmark futures added as much as 3.1% while still trading near the lowest levels since July 2021. Industrial consumers are waiting for lower wholesale costs to be reflected in their energy bills before increasing consumption.
Manufacturers of cement, glass and steel have been hit by progressively higher prices that prompted them to curb production. While there are fears in the market that some of that demand destruction could be permanent, consultant Energy Aspects Ltd. expects consumption to gain momentum in the second half of the year.
“We expect to start seeing year-on-year growth in gas demand starting next month as lower prices are increasingly passed through, with growth then accelerating over the remainder of the year,” analysts led by James Waddell said in a note. “That said, we maintain some caution that there could be more permanent, non–price responsive, demand loss than we are anticipating this year.”
Dutch front-month futures, Europe’s gas benchmark, advanced 3.1% to €40.23 a megawatt-hour at 11:31 a.m. in Amsterdam. Prices in following months also advanced, with a January contract being the highest at €61.08.
BloombergNEF also expects demand gains this year, both during the summer — bolstered by the power sector — and the upcoming winter, citing the steep drop in prices.
“Looking further ahead, the winter forecast contains a lot of uncertainty and risk, which is evident by the sharp contango between summer and winter gas products,” BNEF said in a note this week.
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