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European Natural Gas Prices Climb on Slower Storage Refills and Supply Concerns
Prices for European wholesale natural gas increased on Tuesday amid growing concerns about summer supply. The benchmark Dutch front-month contract gained 4.7% to trade at 46.54 euros per megawatt-hour, while the equivalent front-month contract in the United Kingdom jumped 5.1% to 111.00 pence per therm.
A key driver for the price rally is an impending heatwave forecast for parts of Northwest Europe and Italy. The anticipated rise in temperatures is expected to significantly increase electricity demand for air conditioning, which in turn would boost consumption at gas-fired power plants.
On the supply side, the market is reacting to reduced gas flows from Norway, which is currently Europe's largest pipeline provider. Unscheduled extensions to seasonal maintenance at the Nyhamna processing plant and the Troll gas field have reportedly curbed output, tightening the immediate supply outlook.
AdAdding to the anxieties is the slower pace of refilling the continent's underground storage facilities. According to data from Gas Infrastructure Europe (GIE), European gas storage is currently 43.1% full, which is below the 51.4% level recorded at the same point last year. Analysts note that strong demand for liquefied natural gas (LNG) in Asia has been drawing cargoes away from Europe, contributing to the slower refill rate.