European natural gas is set for its longest run of weekly losses in almost three years, as a forecast for more mild weather offsets supply concerns.
(Bloomberg) — European natural gas is set for its longest run of weekly losses in almost three years, as a forecast for more mild weather offsets supply concerns.
Benchmark futures headed for a sixth consecutive weekly decline, the longest stretch since February 2020, even as prices fluctuated Friday. A cold front moving through the British Isles and part of the continent is expected to ease by the end of the month, according to Maxar Technologies Inc.
The recent price slump marks an extraordinary reversal of fortune for Europe, which last summer saw record spikes that risked causing economic disaster as Russia curbed supplies. However, lower consumption by industries and mild weather have helped to balance the market, and some politicians now say the worst of the crisis is over.
Imports of liquefied natural gas and high storage levels have provided a buffer for the region, even as supplies from Norway remain capped amid seasonal maintenance. Russia’s remaining shipments — sent via Ukraine — have also declined this week, though some analysts suggest this may be due to lower demand from buyers rather than supply issues.
Dutch front-month futures, Europe’s gas benchmark, rose 2% to €61.90 a megawatt-hour by 11:56 a.m. in Amsterdam. The contract is still on course for a 4% loss this week, after hitting a 16-month low recently. UK-equivalent gas futures are also poised for a weekly drop.
German front-month power fell 1.8% to €142.50 per megawatt-hour, after earlier dropping to the lowest since September 2021.
So far, energy savings in both industrial and residential sectors have helped Europe to avoid gas shortages this winter. Nearly 80% of households in the continent’s biggest consumer, Germany, lowered indoor temperatures in November and December, according to a report by smart-home company Tado.
Still, nuclear outages in France are adding to market concerns, with capacity cuts at another unit of Electricite de France SA extended by six weeks on Friday. And traders are closely watching supply and competition with Asia for LNG, particularly with several outages at LNG terminals across the globe.
“While the outlook has certainly improved, we still expect gas price volatility in the coming months,” analysts at JPMorgan Chase & Co. said in a note Friday. “The market should not become too complacent given the warm weather so far this winter.”
–With assistance from Todd Gillespie.
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