European gas heads for fourth weekly loss as stockpiles fill up

Bloomberg

Natural gas prices in Europe headed for a fourth weekly loss, as ample supplies of liquefied natural gas (LNG) help countries fill reservoirs days ahead of the start of the heating season.
Dutch front-month gas, the European benchmark, declined as much as 6%, and are on pace for a drop of about 5% this week. While prices have eased recently, they are still about six times higher than normal for the time of year.
Europe is racing to ease an unprecedented energy crisis sparked by Russia’s invasion of Ukraine and subsequent supply cuts following sanctions targeting Moscow. Countries across the region are hoarding gas and enacting emergency measures ahead of the heating season, which begins from October 1.
Gas storage sites on the continent are about 87% full. Four more US LNG cargoes signaled northwest Europe as a destination, with three set to arrive in early October, according to ship-tracking data compiled by Bloomberg.
LNG imports have been key to helping European countries deal with the crisis. All eyes are now on the severity of the winter and the response in energy demand in the face of limited gas.
“Gas balances will have to continue relying on demand destruction and strong LNG supply,” Diana Bacila, a senior analyst at Switzerland-based electricity provider Alpiq AG, said on the sidelines of a conference in Duesseldorf, Germany.
Germany, the region’s largest gas consumer, is seeking to secure more supplies from the United Arab Emirates in the coming days, when Chancellor Olaf Scholz visits the country.
Meanwhile, Economy Minister Robert Habeck urged lawmakers to back a massive rescue package for companies struggling with soaring costs. The government decided to nationalise its largest gas importer, Uniper SE.
Demand destruction is set to continue amid elevated prices. Volkswagen AG said that reallocating production around its network of global facilities is one option available in the medium term if a shortage of natural
gas persists much beyond this
winter. Dutch front-month futures dropped 4.3% to 179.50 euros per megawatt-hour in Amsterdam. The UK equivalent declined 4.8%. Benchmark German year-ahead power slipped by 6.7%.
Weather forecasts point to above-normal temperatures and moderate wind generation in northwestern Europe in the first week of October, according to the Weather Co.
That would mean a mild start of the heating season, easing demand concerns. Europe’s gas market remains sensitive to any potential disruptions, after Russia reduced flows in the fallout over its war in Ukraine.
President Vladimir Putin this week called up as many as 300,000 reservists, a major escalation of the conflict.