European Gas Jumps as Lower Temperatures Set to Increase Demand




  • In Business
  • 2022-12-01 09:17:14Z
  • By Bloomberg
 

(Bloomberg) -- Natural gas prices in Europe increased with a wave of cold weather set to boost demand and test the region's preparedness for the winter amid restricted supplies.

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Benchmark futures rose as much as 13% to the highest level since Oct. 13. Temperatures across Europe will likely plummet this month after a relatively mild November, and conditions could be cooler-than-average, according to Maxar Technologies Inc. and Marex.

A harsh winter could leave the continent more exposed to any further supply squeezes after Russia cut off most piped gas flow over the summer. Liquefied natural gas has helped replenish the missing shipments and fill reservoirs, but stockpiles are starting to decline. Gas prices are more than four times higher than normal for this time of year, fueling inflation and hurting economies.

Gas demand for electricity generation could also get a boost from poor wind conditions. Weather forecasts point to moderate to low wind power potential for the UK, continental Europe and the Nordics over the next two weeks.

Dutch front-month futures, the European benchmark, was 6.8% higher at €156.38 per megawatt-hour at 10:05 am in Amsterdam. The UK equivalent contract rose 6.9%.

European leaders have been urging consumers to conserve energy in an effort to get through the winter. The continent is also trying to speed up infrastructure to receive more LNG, with Germany expected to have its first import terminals ready this month. But if a cold snap also hits Asia, demand in the region could surge and heighten competition for cargoes, potentially driving up prices.

For now, China's appetite for LNG have been limited amid a tepid economy and elevated international prices. LNG imports have fallen 22% until October.

--With assistance from Josefine Fokuhl.

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