European natural gas prices declined as ample inventories and tanker-borne fuel help offset lower supplies from Russia.
(Bloomberg) — European natural gas prices declined as ample inventories and tanker-borne fuel help offset lower supplies from Russia.
Benchmark futures fell as much 5.6% after gaining as much as 6.3% earlier on Thursday. Russian flows via Ukraine slumped further while cold weather swept across the continent, boosting demand for the fuel used in heating and accelerating withdrawals from storage sites.
Cold Snap Persists Into Next Week Across Parts of Western Europe
The region is managing without rationing and blackouts as mild weather in recent weeks helped build inventories, which are still more than 80% full. Imports of liquefied natural gas and reductions in usage have eased pressure on the region, lowering concerns over the rest of the winter and reining in inflation.
Russia’s Gazprom PJSC slashed deliveries to Europe via Ukraine by 23% on Thursday, deepening cuts that began earlier this month. One buyer, Austria’s OMV AG, said it’s currently receiving the full nominated quantities.
Gazprom declined to comment on the reasons for the lower deliveries. But after decreasing over the past month, spot gas prices are now likely cheaper than the Russian long-term contractual volumes, according to Tom Marzec-Manser, head of gas analytics at ICIS in London. The European benchmark is now more than 40% below levels seen a month ago.
Russian flows have already dropped to a fraction of levels seen before the invasion of Ukraine, with only two pipeline routes remaining — one via Ukraine, and the other via Turkey supplying some countries in southeast Europe.
Deliveries from Norway are also below levels seen earlier this month. Market participants are eyeing when the US’s Freeport LNG will restart production after an explosion last summer and several delays.
At the same time, a cold blast is sweeping through northwest Europe with temperatures about 5 degrees Celsius below normal forecast for Paris through the weekend, according to forecaster Maxar. Lower-than-average temperatures will continue to impact central and southwest Europe next week, it said.
Dutch front-month futures, Europe’s gas benchmark, were down 3.8% at €59.38 a megawatt-hour at 1:18 p.m. in Amsterdam. UK contracts were down 2.5%. Prices have swung between losses and gains in recent days.
“We have seen prices stabilize during the last couple of days following the steady losses during the last month,” Energi Danmark said in a note. “The question is if this is a sign that the market feels we have reached a bottom, or if it is merely a pause.”
–With assistance from Elena Mazneva and Andrew Reierson.
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