European Natural Gas Futures Signal Concern About Next Winter

By Tsvetana Paraskova of Oilprice.com

Despite short-term bearish factors and relatively low natural gas prices for the nearest months, the longer-dated futures of Europe’s benchmark prices have rallied in recent weeks, suggesting that the market is jittery about European gas supply for next winter.

The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, were at $47.64 (43.65 euros) per megawatt-hour (MWh) as of 11 a.m. GMT on Tuesday. The nearest futures prices have been lingering around that range for weeks, as the winter ended, the weather turned warmer, and stockpiles at Europe’s gas storage sites are at their highest for an end to a winter period for a decade.

However, the December futures, at $63.31 (58 euros) per MWh on Tuesday, have rallied by 9% in the last two weeks, per Bloomberg data, suggesting continued concerns about refilling European storage ahead of next winter and uncertainty about France’s nuclear fleet availability.

As of April 9, storage sites across the EU were 55.55% full, according to data from Gas Infrastructure Europe. That’s well above the five-year average and the gas in storage levels at the end of the previous two winters.

Contrary to initial expectations, the 2022/2023 winter went surprisingly well, but the energy crisis isn’t over, and Europe is not out of the woods yet.

If demand for LNG in Asia, especially in China, picks up with the Chinese reopening, Europe may have to pay up for spot supply to beat competition from the Asian market ahead of next winter.

As fears of a gas crunch did not materialize this winter, pulling European natural gas prices down, Europe shouldn’t count on another warmer-than-usual winter and less competition from Asia as it starts to prepare for the 2023/2024 winter, analysts say. In a market with stronger competition from Asia for LNG supply, the current European gas prices may not be enough to continue attracting spot cargoes.