(Bloomberg) -- European natural gas extended gains, with traders monitoring the threat from a late-season tropical storm to fuel production in the US.
Benchmark futures also followed broader markets higher as voting in the US presidential election got underway.
Storm Rafael is heading toward the Gulf of Mexico after forming in the Caribbean. While it may weaken closer to Louisiana — sparing US export facilities — it’s sparked a round of evacuations from some oil and gas production platforms in the area.
The uncertainty arising from the US election over potential changes to international trade, taxation and foreign policy could last for a while, analysts at Engie SA’s EnergyScan said in a note. And there’s still “considerable uncertainty” over the Storm Rafael’s trajectory, they said.
At the same time, there’s been a temporary jump in gas demand in Europe, as renewable energy output dips this week. Wind generation has declined in Germany, according to a Bloomberg model, and has also dropped significantly in the UK. Gas-fired plants were covering more than 60% of the country’s energy mix early Tuesday, according to grid data.
Still, mild temperatures across much of the region is curbing heating demand, consultancy firm Auxilione said in a note. That’s helping to keep the market balanced.
Europe looks well supplied for now, with storage sites 95% full, but the market remains vulnerable to supply risks. Heightened Middle East tensions, coupled with concerns about Russia’s gas transit through Ukraine and production outages from Norway to the US, have kept traders on edge in recent months.
“The year to date was marked by volatility — with some substantial short-term price increases due to the geopolitical situation, supply risks in the gas business in the pan-European context and market-specific weather trends,” Germany’s Uniper SE said in an earnings report Tuesday.
Dutch front-month futures, Europe’s gas benchmark, were up 2% at €41.05 a megawatt-hour by 12:41 p.m. in Amsterdam. The UK equivalent rose 1.7%.
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