European natural gas prices fluctuated as traders weighed potential supply risks against unusually mild weather lingering over much of the region.
(Bloomberg) — European natural gas prices fluctuated as traders weighed potential supply risks against unusually mild weather lingering over much of the region.
Benchmark futures rose as much as 7.8%, paring a weekly decline. While France and Germany are set to see above-normal temperatures next week, the global gas market remains tight, and Europe is exposed to any further supply disruptions.
“The fundamentals haven’t changed,” said Graham Freedman, an analyst at consultancy Wood Mackenzie Ltd. “We still have the rest of the winter to get through and supply risks are still there.”
Gas prices remain well above their usual levels for the time of year, even as the recent downward trend has brought some relief to Europe’s energy crisis amid lower flows from Russia. Global export capacity for liquefied natural gas is limited, and competition with Asia for the fuel could increase.
Still, lower demand recently has helped Europe keep gas inventories high. European stockpiles are 83% full — above the five-year seasonal norm for this time of year — with some nations even sending gas into storage in recent days. In Germany, the region’s largest economy, that level is almost 91%, according to Gas Infrastructure Europe.
Healthy stockpile levels and lower prices in recent weeks have eased the burden on consumers and sparked optimism among European authorities.
“We are very optimistic, which we weren’t really back in the fall,” Klaus Mueller, president of Germany’s network regulator, said in an interview with public broadcaster ARD, adding that a gas shortage this winter is unlikely. “The more gas we have in storage facilities at the beginning of the year, the less stress and cost we will face in filling them again for next winter.”
Record-Hot Winter Gives Europe Breathing Room on Energy Crisis
Residential, commercial, and industrial gas-users have all been reducing their demand over winter to reduce costs. Even with a cold-snap in the beginning of December, pan-European demand was 11% below the five-year average last month, ICIS data show.
Dutch front-month futures have declined during the previous three weeks. On Friday, the contract rose 4.6% to €75.75 per megawatt-hour by 11:16 a.m. in Amsterdam. The UK equivalent increased 2.3% following an earlier drop.
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