European natural gas rose as traders turned their attention to forecasts for hotter-than-usual weather during July 2023, which likely will stimulate demand at a time when supply risks remain.
Benchmark futures settled 7.9% higher, with more facilities in top provider Norway undergoing prolonged maintenance. That coincides with some models showing a return to above-normal temperatures in the northwest region after brief relief over the next few days.
“The focus seems to shift more strongly on weather forecasts for July, where temperatures above the norm across Europe could potentially increase energy demand for cooling purposes,” Energi Danmark said in a note.
Adding to supply concerns, the impact of a planned outage at the major Kollsnes gas-processing plant in Norway starting June 29 has been increased, according to network operator Gassco AS. Europe is also vulnerable to disruptions at global liquefied natural gas facilities as customers became more dependent on the superchilled fuel after Russian pipeline gas deliveries dwindled.
Flows to Cheneire Energy Inc.’s Corpus Christi LNG plant in the U.S. declined June 27, potentially indicating an issue at the facility. American suppliers have been crucial in filling any gaps in Europe since the war started in Ukraine.
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Total LNG arrivals to the continent are well above seasonal norms, even though they have slipped during June 2023. Inventories are far fuller than average, providing a safety net against supply interruptions.
Dutch front-month gas, Europe’s benchmark, rose to €34.51 a megawatt-hour. The U.K. equivalent contract added 6.8%.
“The front-month has found some support at the €30 mark and is having trouble recently getting back below, even this far out before winter,” said Tim Partridge, director of energy markets at the utility consultancy Eyebright Ltd.
So far in 2023, Europe’s power consumption is subdued despite the lower prices, BloombergNEF said in a June 26 note. During the first six months of 2023, it’s been 7% below BNEF’s seasonally adjusted model, which predicts demand based on actual temperature levels, it said.
Clean energy generation is growing, with renewables surpassing power output from fossil fuels last month following rapid capacity expansion, the analysts said.
