European natural gas erased some of Tuesday’s gains with Goldman Sachs Group Inc. saying weaker demand will neutralize the impact of the extension of Norwegian supply outages.
(Bloomberg) — European natural gas erased some of Tuesday’s gains with Goldman Sachs Group Inc. saying weaker demand will neutralize the impact of the extension of Norwegian supply outages.
Benchmark prices slipped as much as 8.4% after the outage at an LNG plant in Norway ended. Several other Norwegian production facilities on Tuesday prolonged maintenance works until the middle of July, worrying traders and driving prices 16% higher.
Similar short-term supply issues have brought back volatility, helping push prices up about 30% this month after dropping to the lowest in two years in early June. Such events are likely to keep the market on edge even as inventories remain far fuller than normal and industrial demand for gas remains muted.
The extended Norwegian outages tightened supply gas balances by about 1.4 billion cubic meters, Goldman said. But weaker-than-expected demand and strong availability of liquefied natural gas have loosened it by 3 billion cubic meters in May and so far in June combined.
While Norway’s maintenance “helps moderate softening risks for the balance of summer, it doesn’t fully offset them,” the bank’s analysts Samantha Dart and Jeffrey Currie said in a note late Tuesday.
LNG supplies to Europe have slumped from the highs seen earlier this year, but remain well above seasonal norms. The region is set to deepen its dependence on the super-chilled fuel as it makes up for virtually lost Russian pipeline gas flows. The price increase this month has made it profitable again for US LNG to go to Europe in the next three months rather than to Asia, according to BloombergNEF.
Read More: LNG Exporters to Favor Europe Over Asia on Shrinking Price Gap
“Now it’s a guessing game as to whether Europe needs to turn down LNG imports over the summer,” consultants Inspired Energy said in a note.
The biggest question is whether demand in Europe picks up later in the summer when storage sites reach capacity limits, risking a temporary glut in the region.
Still, traders remain on alert for news out of Norway. The Hammerfest LNG plant in the country was scheduled to return from an unplanned outage on Wednesday, and Norwegian network operator Gassco AS has marked the outage as inactive at the time it was supposed to end. The plant is on track to restart today, as planned, said a spokesman for its operator, Equinor ASA.
Meanwhile, Brunei LNG said it resumed production after an unexpected shutdown, and activities for the facility’s start-up will continue until June 18.
Dutch front-month gas, the benchmark for Europe, fell 5.1% to €34.20 a megawatt-hour by 12:47 p.m. in Amsterdam. The UK equivalent contract declined 7.3%.
–With assistance from Yongchang Chin and Elena Mazneva.
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