European gas prices rose in a day of extreme volatility, as the Netherlands prepared to permanently close a major field, outages tightened regional supplies and a heat wave boosted demand.
(Bloomberg) — European gas prices rose in a day of extreme volatility, as the Netherlands prepared to permanently close a major field, outages tightened regional supplies and a heat wave boosted demand.
Benchmark Dutch futures settled 7.4% higher at €41.15 a megawatt-hour. Earlier in the day, the contract spiked as much as 30%, the most since early September.
Europe is facing a reminder that its energy security is still vulnerable, even after amassing unusually high gas stockpiles in preparation for next winter. The planned shutdown of the Groningen field — which could occur as soon as October — has rattled the gas market as the region prepares for what could be another scorching summer, driving up demand for the fuel.
The continent is revamping its gas networks after Russia curbed supplies in the fallout of the war. While imports of liquefied natural gas remain seasonally elevated, Europe faces increased competition for the fuel with Asia.
Groningen — one of Europe’s biggest fields — hasn’t been a major contributor to the region’s supply in recent years, though plans for a permanent shutdown add to market nervousness. Meanwhile, works at some major Norwegian facilities are set to continue into July.
The Dutch field’s closing “adds pressure to a market that is already grappling with news of other supply disruptions and expectations of higher demand related to weather,” said Mauro Chavez, research director for European gas and LNG at Wood Mackenzie Ltd.
Read More: Netherlands Set to Close Europe’s Biggest Gas Field in 2023
The Dutch cabinet will make an official decision later this month, according to people familiar with the matter. The government previously said it aims to shut the field at the latest by Oct. 2024 depending on the “geopolitical situation.”
A decision to close the field isn’t entirely irrevocable, the people said, adding that it would take about two weeks to reopen wells in the event of a crisis or very cold winter.
Concerns about gas outages and supplies “have been the physical triggers” for rising prices said James Waddell, head of European gas and global LNG at consultant Energy Aspects Ltd. “But we have to remember that a lot of the market was short going into this month and price rises will have triggered stop-outs, thereby driving the price even higher.”
–With assistance from Anna Shiryaevskaya.
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