European gas prices recovered from a steep drop Monday, as volatility that has dominated the market this month continues amid supply risks and hot weather.
(Bloomberg) — European gas prices recovered from a steep drop Monday, as volatility that has dominated the market this month continues amid supply risks and hot weather.
Benchmark futures settled little changed after dropping as much as 14% earlier Monday. Still, prices are up about 30% since the start of the month, following a series of unplanned outages and hot weather warnings which put traders on edge about the balance of fuel supply and demand.
Even though Europe has turned the page on last year’s energy crisis with gas inventories fuller than usual, June has ushered in weeks of turbulent price swings. Traders are focusing on the possibility that further outages — or a sudden pick-up in fuel demand among businesses and households — could still present a threat to the region’s supply ahead of its next heating season.
Warmer-than-normal temperatures are expected across parts of northern Europe early this week, with Germany’s national weather forecaster extending a heat warning to most of the country on Monday. That could boost demand for cooling, potentially impacting prices. The Rhine river — a vital artery for the country and other parts of inland Europe — is already seeing water levels low enough to restrict trade.
Europe’s energy security is still “vulnerable” even though it has higher gas stockpiles for the upcoming winter than a year ago, Nadia Martin Wiggen, a partner at Pareto Securities AS, told Bloomberg TV on Monday.
Hot weather, dwindling water reserves, extended outages in Norway and some gas demand returning back — all of that has added to the market nervousness after a relative calm. Global competition for gas may increase if it gets even hotter in Asia.
“It’s scary what happened last year, when we had everyone bringing in so much supply,” she said. “The fundamentals had been quite bearish for a while, and now we are starting to see the opportunity for fundamentals to actually turn more bullish.”
Benchmark Dutch front-month gas settled 0.3% lower at €34.90 a megawatt-hour. The UK equivalent fell 1.2%.
–With assistance from Elena Mazneva and Anna Shiryaevskaya.
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