(Bloomberg) -- European natural gas prices advanced as traders digested new risks to fuel supply, with Hurricane Francine approaching the US Gulf Coast and Russian flows across Ukraine set for a possible reduction on Thursday.
Benchmark futures closed 2.4% higher after plunging more than 5% to a six-week low a day before. The market is bracing for impact from Hurricane Francine, which is expected to make landfall in Louisiana on Wednesday afternoon or evening and potentially affect some gas liquefaction plants.
Traders are also eyeing volumes of Russian gas crossing Ukraine, after intense fighting near a key intake point last month prompted speculation that flows might be curbed further. While that hasn’t been the case so far, transit volumes at the Sudzha point are expected to drop by nearly a third on Thursday, according to preliminary nominations posted by the Ukrainian grid.
A spokesperson for Gas Transmission System Operator of Ukraine declined to comment on the drop. Final nominations from Russia’s Gazprom PJSC may still change later in the day. The grid operator in Slovakia, which receives most of the fuel at the border with Ukraine, showed gas-shipment orders for Thursday within their normal levels as of 6 p.m. local time.
While Russian gas supply crossing Ukraine covers less than 5% of Europe’s fuel needs — way below what it used to be before the war — the market is still sensitive to news on potential disruptions.
Across the Atlantic, Hurricane Francine was closing in on Louisiana, bypassing major liquefied natural gas facilities clustered around the Texas border and another one near New Orleans.
Preparations for the storm mainly involved shuttering nearby offshore platforms, though gas supply to the Louisiana-based Cameron LNG plant has also dropped, signaling it has reduced production. Feedgas into Plaquemines LNG has been at zero since Tuesday, just as the newest plant in Louisiana had been preparing to start up operations.
The US is Europe’s largest supplier of LNG, which it has increasingly relied on since Russia curbed most pipeline flows in 2022. The hurricane season in the Gulf of Mexico has been closely watched by European gas traders as it can disrupt facilities delivering the vital fuel.
At the same time, Europe’s storage sites are 93% full, creating a cushion for any unexpected events affecting supply during the upcoming winter. Analysts at energy consultancy Inspired Plc said weak Asian demand is also helping to keep a lid on prices.
Dutch front-month futures, Europe’s gas benchmark, settled at €36.14 a megawatt-hour. The UK equivalent contract also advanced after a drop on Tuesday.
--With assistance from Ruth Liao and Elena Mazneva.
©2024 Bloomberg L.P.
