Prices of EUROPE GAS soften on stronger winds and Norwegian supply

The Dutch and British wholesale prices of gas have weakened slightly Tuesday morning due to forecasts of increased wind generation and Norwegian supply. However, colder weather could still increase prices.

LSEG data revealed that the benchmark contract for the Dutch TTF hub at the front-month was down 0.26 euros at 35.95 euro per megawatt (MWh) at 0823 GMT. The contract for November also decreased by 0.06 euros to 36.70 euro/MWh.

The front month in the British market was 0.95 pence less at 86.20 cents per therm.

The price of some Norwegian maintenance work and the colder weather forecast for October's start have increased prices on Monday.

According to LSEG, the forecast for local distribution zones demand (mainly heating) is 109 gigawatts per day (GWh/d).

The Norwegian economy is expected to be more bearish tomorrow, as the Karstoe Gas Processing Plant will resume operations after a recent outage. Also, increased wind energy generation for this week is forecast.

Tomasz Marcin Kowalski, analyst at LSEG Gas, says that the weather is likely to be the main factor affecting today's gas price.

Morgan Stanley analysts said that Europe must fill its gas reserves to near 100% before the winter season begins around November in order to minimize price volatility.

The inventory fill rate is now at a seasonal low that has not been seen in many years, mainly due to lower LNG imports than last year, as the arbitrage economics of U.S. Liquefied Natural Gas (LNG), are still more favorable to Asia.

They added, "We believe that this focus on filling up storage and securing LNG supplies for winter will keep European gas costs in the high 30s of euros/MWh."

Gas Infrastructure Europe reports that the European storage capacity is currently at 94%.

The benchmark contract on the European carbon markets increased by 0.28 euros to 64.38 euro per metric ton.

(source: Reuters)