Story
European Gas Prices Rise as Slower Storage Refills Heighten Supply Concerns
Summary
European wholesale natural gas prices increased this week, driven by forecasts of a summer heatwave, unexpected maintenance extensions in Norway, and a slower-than-usual pace of refilling storage facilities.
European wholesale natural gas prices saw a notable increase on Tuesday, fueled by concerns over tightening supply ahead of a projected summer heatwave. The benchmark Dutch front-month contract rose by 4.7% to 46.54 euros per megawatt-hour, while the equivalent contract in the United Kingdom climbed 5.1% to 111.00 pence per therm.
Market anxiety has been stoked by forecasts of an intense heatwave expected to cover parts of Northwest Europe and Italy. The anticipated rise in temperatures is projected to increase electricity demand for air conditioning, which would likely require gas-fired power plants to increase their output.
Compounding the situation are supply-side constraints. Gas flows from Norway, Europe's primary pipeline supplier, have been reduced due to unscheduled extensions of seasonal maintenance at the Nyhamna processing plant and the Troll gas field. This has occurred as the rate of refilling the continent's gas storage facilities is proceeding more slowly than last year.
AdAccording to data from Gas Infrastructure Europe (GIE), European gas storage is currently 43.1% full, compared to 51.4% at the same point in the previous year. Analysts also note that strong competition for liquefied natural gas (LNG) cargoes from Asia has limited spot deliveries to Europe, contributing to price volatility.