European natural gas erased some of Tuesday’s gains with Goldman Sachs Group Inc. saying weakened demand will neutralize the extension of supply outages in Norway.
(Bloomberg) — European natural gas erased some of Tuesday’s gains with Goldman Sachs Group Inc. saying weakened demand will neutralize the extension of supply outages in Norway.
Benchmark prices slipped as much as 7.6%. Several Norwegian production facilities prolonged maintenance works until the middle of July, causing some concern for traders and driving prices 16% higher on Tuesday.
Similar short-term supply issues have brought back volatility, helping push prices up about 30% this month after dropping to the lowest in two years in early June. Such events are likely to keep the market on edge even as inventories remain far fuller-than-normal and industrial demand for gas stays muted.
The extended Norwegian outages tightened supply gas balances by about 1.4 billion cubic meters, Goldman said. But weaker-than-expected demand and strong availability of liquefied natural gas have loosened it by 3 billion cubic meters in May and so far in June combined.
While Norway’s maintenance “helps moderate softening risks for the balance of summer, it doesn’t fully offset them,” the bank’s analysts Samantha Dart and Jeffrey Currie said in a note late Tuesday.
LNG supplies to Europe have slumped from the highs seen earlier this year, but remain well above seasonal norms. The region is set to deepen its dependence on the superchilled fuel as it makes up for the virtually lost Russian pipeline gas flows. The price rise this month has again made it profitable for US LNG to go to Europe in the next three months rather than to Asia, according to BloombergNEF.
Also read: LNG Exporters to Favor Europe Over Asia on Shrinking Price Gap
Still, traders remain on alert for news out of Norway. The next test is expected Wednesday when the Hammerfest LNG plant in the country is scheduled to return from an unplanned outage due to a gas leak.
Dutch front-month gas, the benchmark for Europe, fell 3.5% to €34.80 a megawatt-hour by 9:40 a.m. in Amsterdam. The UK equivalent contract declined 4.1%.
–With assistance from Yongchang Chin.
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