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European natural gas advanced again with traders focusing on weather forecasts, while outages at key facilities highlight the risk of potential winter shortages.
Benchmark futures jumped as much as 10%, extending their rebound from losses earlier in the week, with temperatures dropping closer to seasonal levels after an unusually mild October. Some forecasts also point to colder-than-normal conditions in northwest Europe early next month, meaning an increase in heating demand.
While the recent warmth, strong imports of liquefied natural gas and fuller-than-normal gas stockpiles have given Europe a much-needed reprieve from the energy crisis, a cold snap or supply disruptions would quickly see the continent dip into its reserves, threatening fuel rationing.
“The cushion provided by the current mild temperatures, lower gas prices and high storage levels should not lead to overly optimistic predictions about the future,†the International Energy Agency (IEA) warned on Thursday. Europe is facing a widening supply shortfall next year, it said in a report, repeating its call for more measures to bring down gas demand.
It remains unclear whether the Freeport LNG facility in the US, damaged by an explosion in June, will restart as planned this month. In Norway, two gas fields have unplanned capacity reductions, according to network operator Gassco, although total flows from Nordic country are expected broadly stable.
European gas demand will decline by about 11% this year “for the first time in history†as a result of higher prices, but more is needed to avoid shortages in 2023, IEA Executive Director Fatih Birol said on Thursday.
Traders are also keeping a close watch on demand in Asia, with China’s top gas producers expecting tight winter supplies.
—Bloomberg