European natural gas fluctuated with the end of a short-lived cold spell in sight while healthy stockpiles are helping tackle any boost in demand.
(Bloomberg) — European natural gas fluctuated with the end of a short-lived cold spell in sight while healthy stockpiles are helping tackle any boost in demand.
Benchmark futures swung between small gains and losses, after falling as much as 2.3% earlier. The ongoing chilly weather in parts of western and central Europe, coupled with low wind output, is raising gas consumption. But temperatures are expected to rebound soon and could remain above seasonal norms for the next two weeks, according to forecaster Maxar Technologies Inc.
Prices have declined more than 20% this year, and are hovering near levels seen before the Russian invasion of Ukraine. Reduced consumption by industries and a mostly mild winter have decreased the need to tap into underground storage, which remains well above the average levels of the last five years.
“It seems prices have found an equilibrium around their current levels,” EnergyScan, the analysis platform of Engie SA, said in a daily note. “Any strong drop below those levels could trigger a rebound in demand from power generation and industry.”
Consumption discipline along with steady supplies of liquefied natural gas — which rose to record-high levels at one time during the winter — is key for Europe as it can no longer rely on large volumes of Russian pipeline gas. Traders are closely watching for any signs the fragile balance might be disrupted after prices eased significantly from last year’s records.
Dutch front-month gas, Europe’s benchmark, traded 0.6% lower at €57.75 a megawatt-hour by 11:10 a.m. in Amsterdam, mostly mirroring its moves a day earlier. The UK equivalent contract added 0.2%, reversing an earlier decline.
For now, supplies to Europe remain healthy. Some parts of Turkey’s local gas network were hit after a pair of disastrous earthquakes earlier this week, but there have been no reports on damages to major infrastructure, including a pipeline still delivering Russian gas to southern parts of the European Union.
Still, concerns about the broader energy market keep appearing. Electricite de France SA announced a nine-month halt of a nuclear reactor, adding to worries about the reliability of the country’s atomic fleet — the backbone of Europe’s electricity system. It could increase demand for gas for power generation, and keep the market volatile.
“We can’t assume energy prices will continue to fall, and they could well rise from their current levels with the outlook still dependent on temperatures in Europe and the unpredictable situation in Ukraine,” the Resolution Foundation think tank said in a note Tuesday.
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