European gas rose for a third day, with icy weather forecast in the western region next week and the potential for the freeze to spread.
(Bloomberg) — European gas rose for a third day, with icy weather forecast in the western region next week and the potential for the freeze to spread.
Benchmark futures advanced as much as 4.3% and are headed for just their third weekly gain this year. While mostly mild weather has taken the pressure off prices recently, traders are now weighing the possibility of higher heating demand in early March.
“Below normal temperatures are forecast to span from the mid-continent to southwest during this period,” forecaster Maxar Technologies Inc. said in a report Friday. Madrid could see temperatures 7C below the seasonal average early next week.
Gas inventories in Europe are still well above usual levels for the time of year, at 63% full, but the cold snap at the end of the heating season will increase pressure on storage — which cold lead to higher injections over the summer season.
Despite falling by more than 30% this year, prices are still historically elevated, hurting industrial demand.
Chemical giant BASF SE said it will cut 2,600 positions, about 2% of its global workforce, to reap cost savings. The company slashed its gas consumption by around one-third in Europe last year and incurred €2 billion in additional costs for the fuel in Europe alone, compared with the year earlier, Hans-Ulrich Engel, Chief Financial Officer, said after the company reported earnings.
“Prices have declined, but we expect them to stay considerably higher in the long run compared to what they were over the past several years,” Martin Brudermueller, chief executive officer of BASF, said.
Industrial, Power Demand
Several industrial users have seen customers reduce their stocks, which hasn’t yet allowed demand for gas to rebound despite lower prices, Goldman Sachs Group Inc. said in a report on Thursday. That process will be complete by the end of this quarter, encouraging consumption of industrial products — and in turn, gas — over the summer, the bank said.
Front-month gas futures rose 3.9% to €52.78 per megawatt-hour by 12:26 p.m. in Amsterdam, heading for a weekly gain of almost 8%. German next-month power prices were up 3.9%.
Coal prices surged the most since late November. The recent slump in gas prices, along with the carbon price rally, is making gas plants in Europe cheaper to run relative to coal, according to BloombergNEF. The researcher revised up its forecast for gas demand in power generation in the region over the summer.
–With assistance from Elena Mazneva and Josefine Fokuhl.
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