European Gas Prices Rebound on Lower Norwegian, LNG Flows

(Bloomberg) -- European natural gas prices gained as reduced flows from Norway and lower US liquefied natural gas volumes added to concerns about the risk of Russian supply cuts.

Progress in the continent to refill storage facilities has weighed on prices over the past month, with Friday marking the benchmark contract’s fifth weekly decline. However, an explosion last week at a major Texas LNG export terminal is expected to limit US exports of the fuel in the coming weeks. 

In addition, Norwegian supplies have been curbed by planned and unplanned outages at key facilities.

“Despite the significant improvement in stock levels, the European gas balance still needs strong LNG supply,” EnergyScan, Engie SA’s market analysis division, wrote in a note. 

Concerns over Russian shipments continued. Deliveries via the Nord Stream pipeline to Germany -- the biggest link to the European Union -- slipped further on Monday, while flows via Ukraine also remain limited, orders show. 

Dutch front-month gas, the European benchmark, settled 1.1% higher at 83.40 euros a megawatt-hour, after earlier falling as much as 3%. The UK equivalent contract jumped 5.1% to 153.71 pence a therm. 

Gas storage facilities in Germany are now 53% full, “which is better than in previous years but not good enough,” Klaus Muller, president of the Federal Network Agency, said Monday. He added that there will probably be no storage re-filling when Nord Stream has seasonal maintenance. The link’s planned shutdown is scheduled for July 11-21.

UK-Belgium Link

Some supply issues into Europe have been resolved after filter issues at a pipeline connecting the UK to Belgium appear to have been resolved over the weekend as planned. Britain is now able to export surplus fuel to mainland Europe, after the issue made the day-ahead price tumble the most on record Thursday. The contract jumped as much as 91% on Monday.

Still, traders will keep a close watch on inventory levels over the next few weeks, especially after the fire at the US LNG terminal.    

“Uncertainties over the Freeport terminal will keep prices relatively bullish this week,” Alfa Energy said in a research note. Coupled with a drop in supplies from Russia’s Nord Stream “prices will be sensitive and likely to react upwards to news feeds.”

Meantime, Northeast Asia spot LNG prices are also heading higher on hotter weather in the region, although lockdowns in China and a trucker strike in South Korea weighed on industrial demand for the fuel. 

In Europe, the onset of summer is reducing consumption of gas, but extended above-normal temperatures could boost demand for cooling. The forecast for later this week turned hotter across mainland Europe, with “impressive heat” in western France, according to forecaster Maxar.

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