European Gas Prices Rise as Another Cold Snap Approaches Region

(Bloomberg) -- European natural gas prices advanced on signs that another cold snap will hit the region before Christmas, while international competition for LNG starts to intensify. 

Benchmark futures rose as much as 3.3%, erasing an earlier loss. While warmer weather is expected early next week, temperatures are then set to fall below the seasonal average in the Nordics and the UK, according to forecaster Maxar.

EUROPE WEATHER: Milder Weather to Be Short-Lived in UK, Nordics

The cold blast now sweeping through northwest Europe has boosted demand for gas in heating amid severely reduced Russian pipeline flows. The region is relying on stockpiles amassed over the summer and mild fall, while liquefied natural gas imports soar to record levels for the time of year. But attention is shifting to next year.

Competition for LNG is set to increase as Beijing pivots away from its Covid Zero policy, which is poised to boost demand. China bought several shipments of the fuel for next year. Europe’s LNG wave this year came largely as the Asian nation’s consumption was subdued. Global supply won’t increase substantially until the middle of the decade. 

“Commodity prices (gas and power) will continue to stay elevated due to geopolitically driven gas curtailments,” analysts at Sanford C Bernstein & Co LLC said in an emailed note. 

Storage sites across Europe are now about 87% full, having shed about nine percentage points over the first month of net withdrawals. For the time of the year, Britain had the highest consumption of gas on record on Dec. 13, according to National Grid data. 

Dutch front-month futures, Europe’s gas benchmark, traded 2.3% higher at €134.51 a megawatt-hour by 10:29 a.m. in Amsterdam. The UK equivalent contract rose 2.3%.

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