European gas prices jump ahead of frigid weather

European natural gas prices surged as much as 7.1 per cent, with frigid weather expected to start eroding gas inventories and outages occurring at a few key facilities on Tuesday (Nov 29).

Temperatures are set to be “unseasonably cold” across the northern part of the continent starting next week, forecaster Maxar said in a report, while revising its outlook for early December lower. 

The freeze will be the region’s first real test of its resiliency amid the energy crisis this season, as mild temperatures so far have curbed demand for heating. With Russia cutting most of its gas supplies to Europe in the fallout over Moscow’s war in Ukraine, the continent is set to delve further into its stockpiles that it has spent months accumulating.

Storage sites are still about 94 per cent full on average, according to Gas Infrastructure Europe, due to the recent weather and a massive effort to import liquefied natural gas. Before the war began in February upended supplies, Russian state-controlled company Gazprom supplied about a third of all gas consumed in Europe. 

Gas prices were buoyed early Tuesday by withdrawals from storage alongside lower wind output for this week, analysts at Alfa Energy said in a note. There are also process issues at the Troll field in Norway and the UK’s Barrow North terminal, according to outage notices.

Concerns that Russia will crimp pipeline flows via Ukraine have eased after Gazprom said on Monday it wouldn’t reduce gas shipments to Moldova via Ukraine, as it had threatened, having previously halted Russian gas flows via other routes. Gas transit via Ukraine will continue at normal volumes on Tuesday, the company said. BLOOMBERG

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