(Bloomberg) -- Europe’s natural gas market is facing array of near-term risks, lifting near-term prices before the start of the heating season.
Benchmark futures for next month have been trading at a smaller discount than usual to October, indicating that the market is jittery about immediate disruptions, rather than a lack of winter supplies.
Top-supplier Norway just embarked on annual maintenance at key facilities, and it’s not unusual for the work to take longer than expected. Meanwhile, traders are monitoring any potential interruptions to the transit of Russian gas via Ukraine, following an incursion by Kyiv’s troops into a region that serves as a key transit point for gas flows to Europe.
“An early disruption therefore presents plenty of upside risk to TTF near curve,” said James Waddell, head of European gas and global LNG at Energy Aspects Ltd., referring to contracts on the Dutch gas hub.
The dynamics are also playing out in the derivatives market, with the cost of insuring contracts for October becoming more expensive than those for January — even before consumers and industry start using more gas during colder months.
Hurricane season is also a persistent threat to US liquefied natural gas this time of year, though at the moment there are no major storms brewing in the Atlantic region. The US is Europe’s biggest provider of the tanker-borne fuel. Separately, Asian appetite for LNG has remained strong amid warm weather and some outages in that region.
For now, ample inventories in Europe are cushioning risks for the start of the winter season in October. Unless demand for LNG remains high in Asia during autumn, Europe is also likely to get more deliveries of LNG.
Dutch front-month futures, Europe’s gas benchmark, rose 0.3% to €38.63 a megawatt-hour by 2:01 p.m. in Amsterdam. The September contract expires Thursday.
--With assistance from Priscila Azevedo Rocha.
©2024 Bloomberg L.P.
