Wholesale gas prices turn higher across Europe as temperatures plummet
European natural gas prices rose as plummeting temperatures across the continent boost consumption and test fragile energy systems.
Wholesale prices increased as much 5% as the cold snap in northwest Europe is putting pressure on stock levels that have been built up for the winter. Still, reserves remain fuller than normal at about 91%, which together with ample supplies of liquefied natural gas is helping to keep gas prices in check.
The outlook for the next two weeks is dominated by an Arctic blast, with temperatures in the UK and Nordics dropping below freezing, according to forecaster Maxar Technologies. Only Iberia and parts of southern Europe will be spared from the frigid weather.
Following a mild autumn, traders are now torn between rising heating demand and relatively comfortable supply conditions, said Ole Hansen, head of commodity strategy at Saxo Bank.
However, he added: “Given the prospect for colder-than-normal temperatures, the price of gas is likely to remain elevated in the coming weeks.”
The main contract for European wholesale gas, for delivery in January, raced 5% higher to €141.25 per megawatt-hour in Amsterdam. The UK equivalent contract settled 3.3% higher. German month-ahead power rose 6.9%.
Volumes of liquefied natural gas sent from import terminals in northwest Europe into local networks hit a record high at the end of November and remain elevated. But the market remains tight without normal flows from Russia, and risks remain if there are prolonged cold snaps, further supply disruptions or a sudden jump in Asian demand.
Europe is still likely to pull through this winter and the next, Engie chairman Jean-Pierre Clamadieu has said. “The feeling is that we’ll manage.”
Yet, many industry watchers expect supplies to get even tighter in 2023, with JPMorgan Chase expecting Europe’s prices to average €155 with a peak of €175 in the third quarter of next year.
Meanwhile, EU nations, racing to design a tool able to prevent further price surges, are still far apart on details — just a week to go before ministers are due to discuss the move.
Meanwhile, global oil dropped to the lowest since January as a broader market sell off and concerns over higher US interest rates. Brent crude dropped below $80 a barrel.
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