European gas prices rise as market resumes focus on supply risk
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European natural gas prices reversed an earlier decline, as traders again weighed the risk of supply disruptions against the swift resolution of a labour strike in Norway.
Benchmark futures are now on course for a sixth consecutive increase, with the prompt contract more than doubling in value over the past month.
Europe is facing its biggest energy crisis in decades, with Russia -- the region’s primary supplier -- curbing shipments as tensions mount over the war in Ukraine and related sanctions. The Nord Stream pipeline to Germany, the main conduit to the continent, is set to close for maintenance in July, and there are concerns that it won’t return to full service after the works.
Prices dipped earlier after the Norwegian government intervened to resolve a pay dispute between energy workers and industry that could have eventually shut more than half of the country’s gas exports.
Three fields have started a run-up in production, and all other strike-affected fields will be back in full operation within a couple of days, Norway’s Equinor ASA said on Wednesday.
Separately, Germany’s cabinet on Tuesday rushed through legislation allowing it to rescue struggling energy companies, in an effort to limit the effects of a supply crunch. The measure, which goes to parliament this week, includes a mechanism to pass on part of the surging cost of gas to consumers, though that won’t be enacted immediately.
German power prices for next year are trading near record levels.
The ongoing threat to supplies from Russia raises the prospect of governments stepping in to curb consumption beyond constraints that already exist because of high prices, according to Citigroup Inc.
“Europe may need to sacrifice some summer industrial usage of gas so that it can get inventories full ahead of peak winter demand,” the bank said in a research note.
The UK’s National Grid Plc will meet with regional gas network companies on Thursday to discuss how to get more factories and businesses to cut consumption this winter.
Dutch front-month futures traded 0.9% higher at €166.60 a megawatt-hour by 3:41 p.m. in Amsterdam. The UK equivalent dropped 7.3%.
- Bloomberg