(Bloomberg) -- European natural gas advanced, halting a slide that pushed it toward oversold territory, as traders weigh ample near-term supply against winter risks.
Benchmark futures rose as much as 2% Thursday, after dropping in earlier trading to a one-month low. Prices had slumped more than 10% over the previous three sessions.
Rising imports of liquefied natural gas and brimming fuel stockpiles have helped ease some supply concerns. Futures are now trading in the €36 range, and volatility in general has subsided. But the heating season is approaching, and the coldest months could pose a challenge.
“A harsh winter would likely push prices up to €55 a megawatt-hour and possibly higher,” SEB AB analysts Bjarne Schieldrop and Ole Rodahl Hvalbye said in a note this week. A mild winter in Europe would keep prices near their current levels, they added.
Extremely low temperatures would cause gas-storage facilities in Germany, the region’s top consumer, to run completely dry by the beginning of February, according to the country’s industry group, INES, which considers all possible scenarios.
Gas contracts’ nine-day relative strength index dropped below 36 earlier Thursday to levels last seen in July. Typically, a reading of 30 or below indicates a possible reversal in the market’s momentum as selling may be overdone.
Global gas supplies remain limited and may get tighter if Russian flows to Europe drop further. An expiration of a gas-transport deal between Moscow and Kyiv at the end of this year is among key concerns in the market.
Russia is ready to continue sending its gas to Europe via Ukraine, but it “can’t force” Ukraine to extend the deal, President Vladimir Putin said Thursday. He added that there are other routes for exports to Europe — if there’s a political will in the region — including the non-operational Nord Stream 2 pipeline.
Dutch front-month futures, Europe’s gas benchmark, traded 1.8% higher at €36.47 a megawatt-hour by 12:52 p.m. in Amsterdam.
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