Prices for gas in Europe are rising amid geopolitical concerns and a weaker wind output
Dutch and British wholesale gas prices increased on Thursday morning, as the market awaited any possible escalation in the Middle East conflict and amid an increase in demand for gas due to weaker winds speeds.
By 0846 GMT the benchmark front-month contract for the Dutch TTF hub had risen 0.90 euros to 42.20 euros (MWh) or $13.12/mmBtu. It was nearing its highest since December 1 when it reached 42.50 euros/MWh.
The day-ahead contract in the British market was up 2.50 p/therm at 104.00 p/therm. Meanwhile, the front-month contract gained 2.22 p/therm to 105.97 pence.
According to Klaas Dzeman, a market analyst with Brainchild Commodity Intelligence, weather forecasts for the week ahead showed lower wind speeds, which would increase gas-for power demand. Fog could also limit solar energy and raise heating demand.
"The shift in tone in Middle East diplomacy might have added a risk premium to oil, gas and other commodities now that the focus is on humanitarian aid rather than achieving a ceasefire any time soon. While fighting continues in Gaza and Lebanon, and at times, other locations are bombed to emphasize that the war hasn't ended, he said.
He added that "more volatility could be on the horizon, but a correction can't be ruled out if there are no major developments."
Israel began its strikes early Thursday morning on Damascus, the Syrian capital. Israel had struck Beirut's south suburbs the day before, and Hezbollah claimed to have fired its first precision guided missiles at Israeli targets.
Dozeman stated that the LNG supply seems to be behind last October. This means that an increased demand may lead to gas storage withdrawals earlier than last year.
European data on gas infrastructure shows that storage sites are 95.31% full.
Ulrich Weber, LSEG's analyst, said that the gas-for power demand in Britain is expected to increase by 32 million cubic metres per day (mcm/d), to 68 mcm/d. This will be mainly due to a decline in wind energy.
Elexon data shows that the peak wind power generation is expected to be 15.7 gigawatts on Thursday, and 7.8 GW Friday.
The benchmark contract on the European carbon markets was down by 0.03 euros, at 64.83 euro per metric ton.
(source: Reuters)
