European Gas Slumps as LNG Imports, Storage Counter Cold Snap

By Bloomberg

Dec 16, 2022

image is BloomburgMedia_RMZ1QLDWLU6901_16-12-2022_10-00-03_638067456000000000.jpg

The Mitte Combined Heat and Power (CHP) natural gas power plant, operated by Vattenfall AB, beyond an Aral AG gas station in Berlin, Germany, on Tuesday, May 17, 2022. The European Union is set to unveil a raft of measures ranging from boosting renewables and LNG imports to lowering energy demand in its quest to cut dependence on Russian supplies which accounted for about 40% of the bloc’s gas demand. Photographer: Krisztian Bocsi/Bloomberg

(Bloomberg) -- European natural gas declined as ample supplies and high storage levels cushioned the impact of the winter’s first cold snap, while EU leaders pushed for a deal on capping prices.

Benchmark futures dropped as much as 9.5% on Friday, and were headed for a weekly decline after four straight increases. The chill is forcing gas to be drawn from storage to meet rising demand, but reserves remain fuller than normal at about 86%. Inflows of liquefied natural gas are at the highest level for the time of the year.

“Despite the strong increase in net storage withdrawals in the past days, EU gas stocks remain comfortable,” EnergyScan, the analysis platform of Engie SA, said in a note.

While temperatures are likely to turn milder early next week, Europe would need to dip further into the gas reserves with another cold spell forecast in the UK and the Nordics around Christmas time. The wintry blast is testing the region’s resilience amid an energy crunch that’s hit the economy and contributed to a cost-of-living crisis.

Jeff Currie, Goldman Sachs global head of commodities research, talks about the outlook for natural gas in Europe

To contain the crisis, European Union leaders on Thursday backed a quick agreement for a controversial gas-price cap to put an end to months of political wrangling. They called on ministers to “finalize” the plan, along with a package of measures to rein in high energy prices, during a meeting on Monday. The key sticking point of the level of the price cap still needs to be resolved.

EU Leaders Urge Gas Price Cap Deal as Level Remains Open

There is “great confidence that an agreement can be reached,” Nina Scheer, the principal energy lawmaker of Germany’s SPD party, said on Deutschlandfunk radio. “The tendency is clear that no one wants a price that jeopardizes purchases, this message is also clear in the room.”

Dutch front-month gas futures, a European benchmark, were 8% lower at €123.95 a megawatt-hour at 10:49 a.m. in Amsterdam. The UK equivalent fell 7.2%.

--With assistance from .

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By Anna Shiryaevskaya