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(Bloomberg) — European natural gas prices extended their advance, highlighting intensifying concerns over fuel supplies amid geopolitical risks.
Benchmark futures rose as much as 2.6% to near €36 a megawatt-hour on Wednesday, a level considered elevated for summer. Contracts are on track for a fourth day of gains as traders find it more challenging to build the region’s stockpiles ahead of winter.
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Concern over a possible escalation of the war in the Middle East is reviving risk sentiment at a time when traders were already facing steeper competition with other big buyers of liquefied natural gas like China and Egypt. Europe’s gas market has proven sensitive to supply disruptions this summer, largely because it now relies on deliveries from across the globe.
“Further escalations in the Middle East show how quickly the TTF can jump in a day,” said Florence Schmit, an energy strategist at Rabobank.
LNG flows to Europe were about 30% lower than average in July, according to ship-tracking data compiled by Bloomberg. While the region’s storage facilities are elevated for the season and more flows are coming from Norway, hotter weather is blanketing most of the continent this week, pushing up demand for air conditioning.
Meanwhile, Austria’s OMV AG said on Wednesday it booked new pipeline capacity over Germany as it looks to secure its energy supplies in case of further Russian flow disruptions to the region. Austria and neighbor Slovakia are the main remaining European importers of pipeline gas from the country after Gazprom throttled deliveries to Germany and others two years ago.
“Short-term gas trading has changed,” said Marco Saalfrank, head of continental Europe merchant trading at Swiss utility Axpo Solutions AG, adding that it’s now more “sentiment driven.”
Dutch front-month futures, Europe’s gas benchmark, rose 2.4% to €35.91 a megawatt-hour at 9:24 a.m. in Amsterdam.
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