After finding a floor of around 22 euros a megawatt-hour at the start of June, European natural gas prices have jumped more than 100%. We have detailed the latest price surge in two pieces, titled “EU NatGas Soars Most In Year As Traders On Edge About ‘Possibility Of Tightening Supplies'” and “EU NatGas Jumps Again, Up 15% As Supply Fears Driven By Extended Outages In Norway.”
On Thursday morning, the month-ahead benchmark contracts skyrocketed as much as 30% to 49 euros. The multi-week rip-your-face-off rally has led to 112% gains.
The squeeze higher is due to the prospect of tightening supplies with maintenance work continuing at major Norwegian facilities through July. There are also fears that a hot summer could drive up cooling demand, which would increase fuel use.
James Waddell, head of European gas and global LNG at consultant Energy Aspects Ltd., told Bloomberg that concerns about European LNG supplies and Norwegian outages “have been the physical triggers.” He added:
“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.”
Bloomberg drove more supply fears for the continent in a note that explained the Dutch government’s plans to “permanently shut down” the Groningen gas field, Europe’s largest, in October, ahead of the winter heating season.
Even though Europe has adequate levels of NatGas storage, the price surge illustrates how fragile the market is to any threat of disruption.
In Asia, NatGas prices spiked 19% to $11.58 per million British thermal units (MMBtu), the most in six months, according to data from S&P Global Commodity.
“Asian gas prices have surged amid hot weather and supply outages in Europe, including disruptions in Norway that are expected to last through the middle of next month. That’s pushed up European prices and intensified global competition for cargoes,” Bloomberg said.
And in the US, despite high production weighing on US benchmark Henry Hub prices for months, forming a floor between the $2 – $3 MMBtu range since February, prices are moving higher to the midpoint of the range as fuel prices in Europe and Asia rise.
It’s still uncertain whether NatGas has reached a bottom. Though price action in recent weeks certainly looks like it.