European natural gas prices edged higher on the prospect of a late-winter cold snap, after last week crossing a key threshold in the region’s recovery from its energy crisis.
(Bloomberg) — European natural gas prices edged higher on the prospect of a late-winter cold snap, after last week crossing a key threshold in the region’s recovery from its energy crisis.
Futures are trading around €50 after slumping below that level on Friday for the first time in almost 18 months.
The region is well-supplied, with flows from Norway rebounding after recent outages and higher volumes from Russia delivered by pipelines crossing Ukraine. Still, traders are wary that heating demand may increase in early March.
“The forecast is colder from prior, with more widespread below normal anomalies now featured in the West,” Maxar Technologies Inc. sad in a report Monday. For now, parts of Europe are seeing unseasonably warm temperatures, though cooler weather is expected to return to cities including London and Madrid later in the week.
Dutch front-month futures, Europe’s benchmark, traded 3% higher at €50.50 a megawatt-hour by 9:30 a.m. in Amsterdam. The contract has dropped about 35% since the start of the year.
Traders are also closely watching for any signs of higher gas consumption in power generation — especially when wind speeds weaken from current levels.
“Gas prices are now at a level that the most efficient power plants can compete with the least efficient coal plants in the near term and we are extremely close to less-efficient gas plants becoming viable, too,” said Christopher Rene, European gas analyst at ICIS.
“However, improving nuclear availability and strong renewable generation should limit the opportunity for both coal and gas plants to run,” he added.
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