European Gas Swings as Higher LNG Flows Counter Mideast Tensions

SEATTLE (Oil Monster): European natural gas prices fluctuated, with traders weighing a recent increase in seaborne supply against ever-present worries about the conflict in the Middle East.

Benchmark futures swung between small gains and losses after closing 1.4% lower a day earlier. Flows from terminals that import liquefied natural gas in northwest Europe rose to the highest since April earlier this week, grid data compiled by Bloomberg show. 

Several LNG vessels have diverted from Asia this month after European gas futures reached this year’s closing highs. That means more supply, but it also signals that traders expect elevated prices, given global competition for the fuel. 

Unusually mild weather across Europe will dampen demand for gas in heating over the next few days, yet some forecasts signal a cold start to November. Europe’s gas storage sites are 95% full, higher than seasonal averages, but below the level at this time last year. Some countries saw minor net withdrawals recently amid a cold spell. 

Despite high storage levels, Europe will start the winter with 6 billion cubic meters less overall inventory than last year, primarily due to lower volumes in LNG storage, which supports gas futures, analysts at Inspired Plc said in a report.

Meanwhile, traders continue to monitor developments in the Middle East, after Israel said it would make its own decision on how to respond to Iran’s ballistic missile attack earlier this month. The US has urged it to avoid nuclear and energy facilities.

“Geopolitical tensions are laying bare fragilities in the global energy system,” the International Energy Agency said in a report Wednesday. While energy prices are a far cry from the peaks reached during the crisis in 2022, “there remains an ever-present risk of volatility,” it said. 

Dutch front-month futures, Europe’s gas benchmark, traded 0.7% lower at €39.70 a megawatt-hour by 12:09 p.m. in Amsterdam. The UK equivalent contract was 0.1% higher.

Prices will likely fluctuate around €40 euros for the time being, supported by LNG demand in Asia, Commerzbank AG said in a note this week.

 Courtesy: www.rigzone.com