European natural gas futures rose sharply on Tuesday after outages were extended at key Norwegian gas facilities.
(Bloomberg) — European natural gas futures rose sharply on Tuesday after outages were extended at key Norwegian gas facilities.
Month-ahead Dutch benchmark futures settled 16% higher, reversing earlier declines, with shipments from the Nordic country now set to remain limited until the middle of July. It’s not the first extension of the works that began last month, deepening uncertainty over Europe’s gas supply in coming weeks.
Prices have been volatile this month amid an array of competing factors, including plant outages and the onset of unusually hot weather in Europe and Asia, which could raise cooling needs and competition for fuel imports. The latest moves signal that traders remain sensitive to supply shocks, despite sluggish industrial demand and high inventory levels that should help the region prepare for next winter.
Access to gas is key for European nations, which have since last year turned to Norway and other countries to fill in gaps left by dwindling Russian pipeline flows. While that helped them build up inventories and avoid the worst of the energy crisis last winter, uncertainties over future security of supply abound.
“Traders have been ill-prepared for a tightening outlook, no matter how short- or long-lived the Norwegian outages turns out to be,” said Ole Sloth Hansen, head of commodities strategy at Saxo Bank A/S.
A Norwegian unit of Shell Plc said it had stopped all non-essential work at the Nyhamna gas processing plant after discovering gas in a cooling system. Nyhamna processes gas from the Ormen Lange and Aasta Hansteen fields, which also extended the outages until July 15.
In addition, the Hammerfest LNG plant in Norway remains offline because of an unplanned outage until Wednesday, with traders awaiting further updates.
Such announcements have turned the market bullish, according to Tim Partridge, director of energy markets at utilities consultancy Eyebright Ltd. Gas prices are up over 30% since the start of June, after they fell nearly 65% in the first five months.
“While ‘Energy Crisis 2’ may not yet be on the cards, the bearishness we were experiencing is displaced by volatility,” Partridge said.
Dutch month-ahead gas futures, Europe’s benchmark, closed 16.2% higher at €36.05 a megawatt-hour in Amsterdam. The UK equivalent contract was up 21.3%. German power for next month rose 10.7% to €110 per megawatt-hour.
–With assistance from Todd Gillespie and Elena Mazneva.
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