European Gas Rally Takes Breather Amid Milder Weather Forecasts

European natural gas declined after rallying more than 40% last week, with traders weighing milder weather forecasts and international efforts to contain the conflict in the Middle East.

(Bloomberg) — European natural gas declined after rallying more than 40% last week, with traders weighing milder weather forecasts and international efforts to contain the conflict in the Middle East. 

Benchmark futures slumped as much as 11% on Monday, retreating from an eight-month high. Temperatures in France, Germany and some other parts of Europe are expected to return to normal or above-average levels in the next few days following the current cold spell, according to forecaster Maxar Technologies. 

Together with high stockpiles and recovering gas shipments from Norway, Europe’s top fuel provider, that’s helping to ease supply risks that have rattled the market recently. In addition, efforts by the US and its allies to prevent the Israel-Hamas conflict from engulfing the wider region have reined in concerns about the impact on gas flows.

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Still, traders are closely monitoring the supply situation across the globe as the market remains fragile and extremely sensitive to any changes in availability of the fuel. 

Liquefied natural gas workers in Australia renewed a call to begin strikes Thursday at Chevron Corp.’s facilities, threatening a disruption of exports while negotiations by both sides continue.

Continued weak demand in Europe and record gas inventories have helped in balancing the market after a historic crisis last year, industry consultant Timera Energy said in a note. “It is easy to be lulled into a false sense of security,” it said. “But there are asymmetric upside risks to prices, particularly if there is an icy winter in Europe or North East Asia, or any material supply disruptions.”

Dutch front-month gas, Europe’s benchmark, traded 9.7% lower at €48.73 a megawatt-hour by 4:39 p.m. in Amsterdam. The UK equivalent contract fell 11%.

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