(Bloomberg) -- European natural gas prices gained as forecasts for more cold weather and supply risks threaten to tighten the global market.
Benchmark futures gained as much as 3.9% on Monday. They’re up around 20% since the start of November.
Temperatures in northwest Europe are expected to drop again in the coming days after a mild start to the week. Meanwhile, Woodside Energy Group Ltd. halted the Pluto liquefied natural gas facility in Australia due to an unplanned outage, adding to broader supply concerns.
Chilly and low-wind conditions in Europe have prompted faster-than-usual withdrawals from gas storage sites this month. While they’re still about 88% full, faster fuel consumption leaves the region more vulnerable during late winter and next summer’s stockpiling campaign.
“It’s still early on in the drawdown season, so the impact of weather can make a large difference in expectations of tightness next year,” said Sadnan Ali, an oil & gas analyst at HSBC Holdings Plc. He expects Europe will exit the heating season with inventories 42% full, well below last year’s 59%.
Europe is increasingly reliant on liquefied natural gas, which is pricier to produce and deliver than pipeline gas from Russia, according to Victor Gao, Chairman of the China Energy Security Institute.
Read: LNG Can Replace Russian Pipeline Gas at High Cost: Energy Daily
Europe “is hooked with highly expensive LNG,” he said on the sidelines of the Energy Intelligence forum in London on Monday. That’s the issue “that European countries, especially major manufacturing countries like Germany and France need to resolve.”
Traders are also monitoring the fate of remaining Russian gas flows across Ukraine.
Fighting has intensified between Moscow and Kyiv after US President Joe Biden allowed Ukraine to hit military targets deeper inside Russia in anticipation of President-elect Donald Trump’s return to the White House, who has pledged to quickly end the war.
Russia’s deal to transit gas via Ukraine expires at the end of the year, with no alternative arrangement yet agreed. US sanctions on Gazprombank, which handles payments for Russian gas by European customers, elevate the risk that those supplies may stop earlier.
Dutch front-month futures, Europe’s gas benchmark, increased by 4% to €48.67 a megawatt-hour by 2:41 p.m. in Amsterdam.
©2024 Bloomberg L.P.