European gas plunges after Russia books pipeline at last minute

[MOSCOW] European natural gas prices plunged from a record close after Russia topped up fuel to the region at the last minute.

Dutch next-month futures fell as much as 16 per cent, with the move from Russia easing supply fears already alleviated by expectations of more liquefied natural gas cargoes reaching the continent.

Weather forecasts are also indicating that a cold snap from next week won't last as long as previously expected. The market is still headed for its longest run of weekly gains since July as storage levels are at their lowest ever for this time of year, promising a tough winter with plenty of more volatility to come.

Traders remain unsure of what Russia's supply strategy will be given increasing political tensions with the west over the Ukraine.

"Whatever the unknown reason for the late booking is, it very clearly highlights the problem Europe is facing with rapidly falling stocks," said Ole Hansen, head of commodity strategy at Saxo Bank.

Gazprom PJSC booked about 30 per cent of pipeline space to deliver gas from Russia toward Germany through Poland in within-day auctions overnight. Earlier on Thursday, for the first time this month, there had been no allocations at all in day-ahead auctions.

Benchmark Dutch front-month gas fell as low as 120.60 euros (S$186.42) a megawatt-hour and traded at 127 euros by 10 am in Amsterdam. It's still up about 20 per cent this week, the most since October, as Russia's supplies remain below last year's levels and its new controversial pipeline Nord Stream 2 is facing delays.

The UK month-ahead contract was down 11 per cent at 319.01 pence a therm, also heading for a straight seventh weekly gain.

BLOOMBERG