Europe’s Natural Gas Prices Rise As Traders Weigh Winter Supply Risks

• Front-month Dutch TTF Natural Gas Futures rose by nearly 3% early on Wednesday morning as the market focuses on winter supply risks.
• Last week, traders began to draw on Europe’s record-high inventories, with rising concerns about a very tight market if temperatures drop.
• As well as the risk of a colder-than-expected winter, rising geopolitical risks in the region raise the specter of a major supply disruption.

Europe’s benchmark natural gas prices rose early on Wednesday as the market is beginning to focus on winter supply risks.

The front-month Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, rose by nearly 3% at the start of trading in Amsterdam on Wednesday, while the UK wholesale gas price contract was up by 3.6%.  

Natural gas traders are already weighing the potential risks to European gas supply this winter, with weather the biggest unknown for traders, suppliers, and governments.  

Last week, traders began withdrawing natural gas from Europe’s record-high inventories as the weather turned colder and heating demand rose.

Gas inventories are nearly full and LNG cargo arrivals are rising this month, but Europe could still see a very tight market ahead in case of a colder winter, analysts say.

The LNG market seems calmer than usual for November when heating demand is typically rising in both Europe and Asia.

Yet, no one can predict how cold this winter in the northern hemisphere will be. Last winter was mercifully warmer than usual in Europe just as the continent was scrambling to import higher LNG volumes despite spiking prices to replace the lost Russian pipeline gas supply.

Even with a structurally lower gas demand, Europe and its biggest economies are not out of the woods yet—and a cold winter could reveal the vulnerability to supply.

“Europe's natural gas inventories may be at record levels heading into winter, but there is no room for complacency,” the International Energy Forum and SynMax said on Wednesday in a new report on LNG trade and market risks.

“In the near term, risks abound with a potential escalation of the Israel-Hamas War, uncertain winter weather in the Northern Hemisphere, and increased risk of infrastructure sabotage,” the IEF warned.

“Any unexpected supply disruption could destabilize markets again.”  

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

• Fears of Contamination Prompt More Quality Checks of WTI Midland Crude
• Court Orders Biden Administration to Hold Oil and Gas Lease Sale
• Iran Warns Expansion Of The Gaza War Is ‘Inevitable’