EUROPEAN GAS PRICES UPDOWN ANEW

BLOOMBERG - Jan 9, 2023 - European natural gas futures rose after four weekly declines as traders focused on imports of liquefied natural gas and the potential for rebounding demand.

Benchmark futures gained as much as 7.9% on Monday, after four consecutive weekly declines. Prices have about halved over the past month, and falling too low could make it more attractive for sellers of liquefied natural gas to push supplies to nations including in Asia. Cheap gas could also boost demand again in Europe, which politicians are seeking to avoid.

Warm weather has helped Europe through the worst of its unprecedented energy crisis that sent inflation spiraling and consumer bills swelling, but much of the winter remains. LNG imports have been critical in replacing some of the lost Russian gas supply, but declining prices in Europe may make it more profitable for sellers of the fuel in the US to send cargoes to Asia in February and March, a risk if there’s a late winter cold snap.

“In case cargoes are diverted, substantial amount of baseload volumes are missing, setting a natural floor to price levels,” said Simone Turri, head of western European structured trading at Swiss energy trader MET International. “Eventually Europe has to attract LNG cargoes during the year to replace Russian supply.”

For European industries, lower gas prices mean some factories can start operations again, he said. But a looming recession could “will limit demand picking up.”

For now, supplies remain plentiful. Norwegian gas flows to Europe increased to the highest since April as nations such as Germany rely on the Nordic supplier to fill in the gaps left by squeezed Russian supplies. Storage sites are also fuller than normal.

Dutch front-month futures, the European benchmark, rose 4.3% to €72.50 a megawatt-hour at 8:55 a.m. in Amsterdam. The UK equivalent contract was 7.1% higher.

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