European Gas Posts First Weekly Decline in a Month as Risks Ease

(Bloomberg) -- European natural gas posted its first weekly decline since mid-December as supply concerns eased.

Benchmark futures fluctuated Friday and ended the week down 9.3%. That follows forecasts for milder temperatures next week, ending a cold snap that’s driven up heating demand and depleted gas stockpiles.

The weekly loss was tempered by an outage at a major BP Plc gas platform in Azerbaijan, while the US announcement of fresh sanctions on Russia roiled broader energy markets. 

Those curbs included two operating liquefied natural gas export plants: Portovaya and Vysotsk on the Baltic Sea coast. Russia’s biggest export facilities, Yamal LNG and Sakhalin 2, were not sanctioned.

Norway’s grid operator also reported an unplanned outage at the giant Troll field after the market closed.

LNG Flows

For now, Europe appears to have sufficient supplies of LNG, which cushions the recent loss of Russian piped flows via Ukraine. Still, traders are closely watching storage withdrawals amid fears restocking may be a challenge ahead of next winter.

Dutch front-month gas, Europe’s benchmark, closed little changed on Friday at € a megawatt-hour after swinging during the day. Futures rallied to a 14-month high earlier this month, before receding. 

“Current prices are enough to preserve storage inventories and rebuild stocks above European storage targets by end-October, assuming no major market tightening from a spell of unusually cold weather or significant supply outages,” Energy Aspects Ltd. analysts said in a note this week.

BNP Paribas SA also said the task of refilling stockpiles to European Union targets will be “less difficult than market prices currently suggest.” Summer gas prices will continue to see downward pressure to €40 a megawatt-hour, the bank said.

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