Europe Gas Extends Gains as Egyptian Demand Stretches the Market

(Bloomberg) -- European natural gas prices extended gains as signs of more intense competition for fuel emerged from Egypt. 

Benchmark futures rose as much as 4% on Friday, after the previous session halted a three-day slide. Egypt is seeking to buy 20 cargoes of liquefied natural gas starting in October, marking the first time in years it will seek imports in the run-up to winter. 

That has left traders fretting about Europe’s market balance, as a demand increase elsewhere could cause less fuel to arrive on its shores. While the region is currently well supplied, it relies on continuous flows from across the globe after Russia curbed its pipeline deliveries in 2022.

“Europe’s winter gas prices will move on demand growth,” Florence Schmit, a European energy strategist at Rabobank, wrote in a note this week. “A colder-than-expected winter in Europe can also add more upside pressure.”

For Egypt, buying LNG cargoes this fall and winter puts it on track to potentially become a net importer of gas. Rapidly-declining gas production and an unusually hot summer have prompted the nation to increase its LNG imports this year to the highest level since 2018. 

The market is closely following the latest developments regarding the end of the transit agreement between Ukraine and Russia and the impact it will have on the region’s supplies from January. Azerbaijan President Ilham Aliyev said Friday he has been approached by Moscow and Kyiv to facilitate the transit of gas through Ukraine to Europe.

Separately, temperatures are set to drop in parts of the continent’s northwest next week, which could bolster demand. 

Dutch front-month futures, Europe’s gas benchmark, rose  to € a megawatt-hour by 12:32 p.m. in Amsterdam. 

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