(Bloomberg) — European natural gas prices fell for a third week as markets weighed a mixed outlook for demand against maintenance at Norwegian facilities that may reduce near-term supply.
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Industrial demand has been muted in recent months as the region recovers from a historic energy crisis. An influx of liquefied natural gas has also helped to keep stockpiles about 57% full on average, well above usual for the time of year and contributing to pushing benchmark gas prices lower.
“The combination of these developments has left the market wondering whether EU storage sites can be filled before September, a development that potentially could send spot prices even lower,” Ole Hansen, head of commodity strategy at Saxo Bank A/S.
Still, there are short-term risks. Norway’s giant Troll field is expected to reduce supplies starting this weekend due to seasonal maintenance, according to network manager Gassco AS. The Kollsnes gas-processing plant is expected to start repair work Monday, two days earlier than initially planned.
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These come amid forecast for cooler weather in northern Europe that could boost heating demand. Competition with Asia for crucial LNG cargoes also remains in focus, with India looking to procure more of the fuel as a heat wave pushes power demand to record levels.
Dutch front-month gas, Europe’s benchmark, fell 1% to €40.16 per megawatt-hour, taking the decline for the week to 2.4%. The UK equivalent contract rose 0.5% on Friday, but was lower for the week.
Coal-to-Gas Switching
Meanwhile, the demand picture in Europe remains mixed. While consumption in industries is yet to pick up, cheaper gas and more expensive coal is incentivizing a switch in power generation. Germany saw demand for gas in electricity increase 5% in March, compared to the 2019-21 average, think tank Bruegel said in a report this week.
So-called dark spreads — the margin for utilities to generate electricity from coal — have turned negative, which is contributing to curbing demand for the fuel, according to Alex Claude, chief executive officer of analytics firm DBX Commodities.
German coal usage for power is set to fall by 2.7% from January through July, compared with last year, according to consultant Perret Associates Ltd.
Still, Rotterdam coal futures for next year advanced 2.7% on Friday. German power for next month declined 1.4%.
—With assistance from Elena Mazneva, Todd Gillespie and Anna Shiryaevskaya.
