(Bloomberg) -- European natural gas prices edged higher as weather forecasts turned colder for parts of the continent next week.
Benchmark futures rose as much as 3.2%, before giving up some of the gains. Lower temperatures in western Europe will likely drive up heating demand. That’s unnerved traders as withdrawals from gas storage are already occurring faster than usual, potentially complicating next year’s stockpiling efforts.
Gas prices are up about 50% this year, climbing steeply in recent weeks as the market braces for a possible halt to Russian deliveries when a transit deal between Moscow and Kyiv expires at year’s end.
For now, Russian gas exports through Ukraine continue as normal, though flows on Monday may be marginally lower.
Depleted Storage
Gas storage facilities across Europe are 85% full, down from 95% at the same time last year. The European Union has raised its target for reserves — aiming to have them at least 50% full by February — to ensure it’s adequately prepared next year.
“Risks for European gas prices are skewed to the upside, with a cold winter start eroding inventories,” Bloomberg Intelligence analysts Patricio Alvarez and Joao Martins said in a note. Stockpiles may end the season just 39% full — even in the absence of extreme weather — hampering next summer’s refill campaign and intensifying competition with Asia for fuel, they said.
Read Also: Europe’s Energy Systems Face Test With Colder Weather Next Week
Dutch front-month futures, Europe’s gas benchmark, traded up 1.5% at €48.51 a megawatt-hour as of 2:01 p.m. in Amsterdam. The UK equivalent contract also gained.
The European Commission has said the EU can live without Russian supply should flows halt at the end of December. It’s working to help member states diversify their sources of gas, energy spokeswoman Anna Kaisa Itkonen said Monday. She also said the EU didn’t see any disruptions to flows for now following US sanctions on Russia’s Gazprombank last month.
--With assistance from Ewa Krukowska.
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