European gas rises as heat and drying rivers fuel demand

Natural gas prices in Europe rose as a hot and dry summer dried up rivers in the region and boosted demand in a market already wracked by supply shortages.

Enchmark futures rose as much as 2.5 percent on Monday.

Very low water levels at key waypoints on Europe’s rivers make it difficult to transport diesel, coal and other commodities across the continent.

Utilities could end up using more gas as an alternative.

That could limit governments’ efforts to reduce consumption and store more gas for use in the winter months.

Still, inventories have remained near average due to higher liquefied natural gas (LNG) imports, keeping price increases in check. The German storage facility reached its refill target two weeks earlier than planned.

The water level at Kaub am Rhein fell to an extremely low level of 30 centimeters (11.8 inches) on Monday and is expected to remain close until at least August 18, the latest federal government data shows.

The Rhine is Western Europe’s most important river for transporting fuel and other industrial goods.

The Dutch front month future, the European benchmark, rose at 10:37 am in Amsterdam to the daily high of €211.35 per megawatt hour.

They rose for the fourth straight week on Friday and are about 10 times higher than the seasonal average over the past five years.

The corresponding British contract rose 2.3 percent on Monday.

Any increase in demand could further tighten the market squeezed by Moscow’s supply cuts.

Deliveries through the key Nord Stream pipeline remain at about 20 percent capacity.

The restrictions have hurt the European economy, hitting industrial production, pushing inflation to the highest level in decades and threatening to plunge major economies into recession.

Competition for LNG cargoes is also intensifying as Asia ramps up buying to stock up for the coming winter.

Sentiment remains “very optimistic due to low inflows from Russia and the increased likelihood that Nord Stream 1 will not return to normal inflows anytime soon,” analysts at trading company Energi Danmark said in a statement. European gas rises as heat and drying rivers fuel demand

Fry Electronics Team

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