European natural gas prices headed for a weekly gain, with traders weighing demand recovery and forecasts for colder weather against healthy supply levels.
(Bloomberg) — European natural gas prices headed for a weekly gain, with traders weighing demand recovery and forecasts for colder weather against healthy supply levels.
Benchmark futures have climbed about 10% this week, after prices slid to the lowest levels since July 2021 earlier this month. Gas is becoming more attractive again compared to coal and oil for some power plants and industrial users. There’s also emerging appetite for liquefied natural gas in parts of Asia.
“Prices seem to be searching for the floor” and will probably rise further later this year, said Kateryna Filippenko, director for global gas research at Wood Mackenzie Ltd. “We will unlikely see the levels of 2022 but the volatility is here to stay,” she said at the European Gas Conference in Vienna this week.
Europe’s gas storage levels — about 56% as of March 29, the latest data — are the fullest for the time of year in more than a decade. And the region is on track to refill its stockpiles well ahead of the next heating season, according to BloombergNEF. That’s keeping prices in check.
Still, traders are watching for anything that could tip the frail market balance. In the short term, the weather is supporting prices, with Europe starting spring on a chilly note. Germany’s national forecaster DWD expects colder-than-normal temperatures across the country in early April, with snow possible at times.
Read More: Spring Starts With a Chill After Second-Mildest Winter
There are also concerns about risks in the months ahead — from the possibility of further cuts in Russia’s supplies, including LNG, to rebounding appetite for the fuel from China.
Some industry watchers, including Goldman Sachs Group Inc. and Vitol Group, have warned gas prices may more than double from current levels on demand recovery.
Dutch front-month gas futures for delivery in May traded 3.7% higher at €45.21 a megawatt-hour by 10:34 a.m. in Amsterdam. The UK equivalent contract rose 4.2%.
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