European natural gas prices rose on the prospect of a late-winter cold snap, after falling last week to the lowest level in almost 18 months.
(Bloomberg) — European natural gas prices rose on the prospect of a late-winter cold snap, after falling last week to the lowest level in almost 18 months.
Benchmark futures advanced as much as 5.4% after dropping below €50 on Friday. Temperatures in cities including London and Madrid could fall from unseasonably high levels by the end of the week, with colder weather potentially persisting into early March.
“The forecast is colder from prior, with more widespread below normal anomalies now featured in the West,” Maxar Technologies Inc. sad in a report Monday.
Europe has so far managed to get through winter without energy rationing or blackouts, but the looming cold spell is a reminder that there is still a month left in the season.
For now, Europe is well-supplied with gas, with flows from Norway rebounding after recent outages and higher volumes from Russia delivered by pipelines crossing Ukraine. But competition with Asia for liquefied natural gas, crucial for Europe after Russia’s supply cuts, may intensify.
Traders are also closely watching for any signs of higher consumption in power generation — especially when wind speeds weaken from current levels.
“Gas prices are now at a level that the most efficient power plants can compete with the least efficient coal plants in the near term and we are extremely close to less-efficient gas plants becoming viable, too,” said Christopher Rene, European gas analyst at ICIS.
There’s a risk that when this happens, it will push up power prices.
Dutch front-month futures, Europe’s benchmark, traded 3.7% higher at €50.86 a megawatt-hour by 11:13 a.m. in Amsterdam. German next-month power followed gas, rising 4.8%.
–With assistance from Josefine Fokuhl.
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