Gas prices in Europe are volatile as cold weather increases demand risks

European natural gas prices fluctuated as colder-than-average weather spread across Europe, sparking nervousness about demand.

Enchmark futures oscillated between small gains and losses on Wednesday. Europeans are starting to heat their homes and businesses as the northern part of the region faces freezing temperatures over the next two weeks, according to weather forecasts. Low wind capacity in the UK is also expected to boost gas demand for power generation.

It’s taken a while for the continent’s winter temperatures to hit, but now they seem to be coming in at full force. Gas storage is still relatively full for the time of year and LNG shipments continue to arrive. However, the risk remains that a severe cold snap could quickly deplete supplies, exposing the continent to new supply shortages.

Traders are watching closely how long the cold weather will last in Europe and how far it will spread in Asia. With lower pipeline flows from Russia, Europe is heavily dependent on LNG supplies, which the region has successfully attracted given weak demand from large Asian buyers.

But this is already beginning to change. China ramped up energy purchases last month as temperatures there fell and demand for coal and gas for heating also increased. Signs that restrictive Covid-19 policies are being eased suggest there could be more competition for cargo.

Dutch gas futures for the front month, Europe’s benchmark, were little changed at €138 per megawatt-hour as of 8:42 am in Amsterdam after falling as much as 1 percent. Gas prices in Europe are volatile as cold weather increases demand risks

Fry Electronics Team

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