European natural gas prices jumped for a third consecutive day as prolonged outages and hot weather across the continent spark concerns over its supplies.
Benchmark futures soared as much as 17% on Thursday, putting the contract on track for a gain of over 30% so far this week. Uncertainty has clouded the outlook for gas traders, with works at some major Norwegian facilities set to continue into July, just as worries mount over global competition for liquefied natural gas and persistently higher temperatures.
Europe has emerged from the worst of last year’s energy crisis with ample gas storage levels, which initially provided a sense of security that it will manage to restock sufficient fuel supplies ahead of next winter. But questions over the demand outlook have sparked price volatility in recent weeks, with hotter weather settling in and driving cooling needs after subdued industrial gas use weighed on prices in the first months of the year.
Concerns about LNG supplies to Europe and Norwegian outages “have been the physical triggers,” said James Waddell, head of European gas and global LNG at consultant Energy Aspects Ltd. “But we have to remember that a lot of the market was short going into this month and price rises will have triggered stop-outs, thereby driving the price even higher.”
The recent volatility has also triggered hedging activity after the prices started steep advances.
Dutch front-month gas, the benchmark for Europe, was up 10.4% at €42.30 a megawatt-hour by 10:39 a.m. in Amsterdam. The UK equivalent contract added 10.7%.
--With assistance from Elena Mazneva, Priscila Azevedo Rocha and Anna Shiryaevskaya.
