Europe’s gas markets are struggling to figure out what’s next as the seasons shift and traders turn to stockpiling fuel amid uncertainties ranging from labor strikes to climate issues.
(Bloomberg) — Europe’s gas markets are struggling to figure out what’s next as the seasons shift and traders turn to stockpiling fuel amid uncertainties ranging from labor strikes to climate issues.
Benchmark Dutch prices have fluctuated wildly in recent days, rising as much as 4% after an earlier slump in prices.
Strikes against pension reform and nuclear-power concerns continue in France, upending energy operations in some cases. Meanwhile, wind power generation is expected to drop over the weekend, especially in Germany, according to Bloomberg models, pushing the country’s week-ahead power prices up as much as 8.3% on Thursday.
With the end of winter just days away, traders are now focusing on refilling storage sites. Inventories on the continent are about 56% full — higher than usual for the time of year — though the figures differ greatly across the region, data from Gas Infrastructure Europe show.
A key test will be the summer. Last year, drought gripped the region shriveling some of its major rivers and straining commodity transport and energy networks.
A similar situation this year would add pressure to Europe’s gas markets amid limited flows from Russia competition for liquefied natural gas with Asia. European gas contracts for August are now trading at a slight premium to those for next-month.
“Persistent dry weather conditions and falling hydro stocks, due to low rainfall and snowpack in the Alps, introduced a significant upside risk for the coming months,” Andy Sommer, team leader for fundamental analysis and modeling at Axpo Solutions AG, said in a research note.
The summer could see low hydropower dispatch and a higher risk of curtailments at nuclear power plants due to cooling water issues, he added. In addition, dry weather could make waterborne coal deliveries difficult.
Dutch front-month gas, the European benchmark, traded up 1.6% at €43.6 per megawatt-hour by 4:29 p.m. in Amsterdam. The UK equivalent was up 0.5%.
–With assistance from Andrew Reierson.
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