European natural gas headed for a second weekly gain as supply risks outweighed the end of a labor dispute in Australia.
(Bloomberg) — European natural gas headed for a second weekly gain as supply risks outweighed the end of a labor dispute in Australia.
Benchmark futures rose Friday, erasing an earlier drop of more than 6% after unions called off strikes at Chevron Corp. liquefied natural gas facilities.
Maintenance in Norway — Europe’s biggest exporter — is set to continue well into October, even as supplies from the country slowly recover from protracted outages. Traders are also monitoring LNG shipments from the US, where flows to a key plant temporarily declined this week.
Europe’s gas market remains extremely sensitive to potential supply shocks as the winter heating season approaches, despite lackluster regional demand and high storage levels. Complicating the picture is Russia’s surprise ban on exports of diesel and gasoline, which could have a wider impact on energy markets if it is prolonged.
Dutch front-month futures traded 1.5% higher at €39.70 a megawatt-hour by 12:20 p.m. in Amsterdam, adding about 9% for the week. The UK equivalent also advanced.
A recent uptick in speculative funds’ net-long positions in the European benchmark “may also play into the resilience” of prices, analysts at Engie SA’s EnergyScan said in a note.
Near-Term Risks
Europe’s winter gas inventories are more than 94% full — much higher than normal for this time of year — but it’s not clear whether stockpiles will be enough to last the duration of winter. Russia’s pipeline supply cuts last year left the market without a substantial buffer to navigate sudden disruptions, and even brief supply risks globally are affecting prices.
In the US, gas supplies to the Sabine Pass liquefaction plant, the nation’s largest, began to recover after a dip on Thursday, data compiled by Bloomberg show.
Recent near-term risks created a pattern this month where day-ahead prices at times traded higher than futures for October. Some European traders even used gas from storage to fill in the supply gaps — not an unheard-of practice, but an anomaly when there’s no heating demand yet.
“This reflects traders with capacity at short-churn storage sites selling gas into a tighter spot market and betting on a prompt price disconnect in October,” analysts at Energy Aspects Ltd. said in a note. The “capacity will be refilled and the net impact on storage fill will be minimal.”
–With assistance from David Stringer and Stephen Stapczynski.
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