Europe Gas Set for Biggest Weekly Gain in Two Months on LNG Risk

(Bloomberg) -- European natural gas prices are headed for the biggest weekly gain since June as jitters re-emerge about the continent’s ability to secure enough supplies ahead of winter.

Benchmark futures soared 28% on Wednesday, before partially retreating through Friday, leaving the contract on track for a weekly gain of about 30%. Traders are awaiting news about potential strikes at three major liquefied natural gas facilities in Australia, which threaten to disrupt about 10% of global liquefied natural gas exports. 

For Europe, the impact would be far more limited than for customers in Japan. The continent has built up much higher inventories than usual for the time of year, and sources its LNG from a wide variety of suppliers. 

Still, concerns are that if Asian prices gain in a supply squeeze, US LNG, which makes up the bulk of Europe’s imports, would shift away. Up until last year the region depended to a large extent on Russian pipeline gas, exports of which have since dwindled, and any signs of actual or perceived supply disruptions are sparking nervousness in the market. 

“There is still far too much fear built into the European wholesale gas prices and events such as the strike vote” are having “far too much impact for a developed market,” said Jonathan Reeves, a director at utilities consultancy Eyebright Ltd.

“My concern for the consumer is that the correction downwards is never equal to the spike, and it takes several days or even weeks to recover to what could already be considered an inflated market,” he said.  

Dutch front-month futures, Europe’s gas benchmark, gained  to € a megawatt-hour at 9:27 a.m. in Amsterdam. UK prices rose . 

European storage sites, meanwhile, are more than 88% full with the heating season not starting until at least October. Gains in European gas prices this week have made US LNG slightly more profitable for Europe in September. 

©2023 Bloomberg L.P.