British and Dutch gas prices inched higher on Tuesday morning as demand increased with the cold weather, although high level of inventories and forecasts for a rebound in renewable energy power generation capped gains.
The British day-ahead contract was up 3.00 pence at 123.00 pence per therm by 0924 GMT, and the front-month contract rose 4.00 pence to 121.50 pence/therm, according to Refinitiv Eikon data.
The front-month contract at the Dutch TTF hub, the benchmark for European gas trading, was 1.35 euros higher at 48.55 euros per megawatt hour (MWh).
“The market seems to be sensitive to the fact that the current increase in demand is not expected to last: temperatures are expected to rise above normal from the middle of next week, and wind and solar generation is also expected to rebound,” analysts at Engie EnergyScan said.
“In a context, gas stocks remain relatively high, there is therefore no need to panic.”
Europe’s gas storage sites were around 62% full overall, according to Gas Infrastructure Europe data.
Gas storage drawdowns continued through the region, with France storage down 10% week on week, and overall storage levels in Europe down 2% versus last week, according to Jefferies.
“France gas storage drawdowns have been particularly large as of late, which could be a result of lower-than-expected nuclear availability. EU gas storage levels remain significantly above 5-year average,” Jefferies analysts said.
Norwegian gas nominations to Britain rose on Tuesday, while nominations to continental Europe remained stable.
Britain’s gas system was almost 26 million cubic metres (mcm) over-supplied on Tuesday, with supply forecast at 362 mcm and demand at around 336 mcm, National Grid data showed.
Peak wind generation was expected at around 5.5 gigawatt (GW) on Tuesday and 4.5 GW on Wednesday, out of a total metered capacity of more than 22 GW, Elexon data showed.
“Prices are returning to manageable levels, particularly in Europe, where a mild winter and demand destruction have helped to cool markets,” said Keisuke Sadamori, the International Energy Agency’s director of energy markets and security.
“China is the great unknown in 2023. If global LNG demand returns to pre-crisis levels, that will only intensify competition on global markets and inevitably push prices up again.”
In the European carbon market, the benchmark contract (CFI2Zc1) fell by 1.05 euros to 99.18 euros a tonne.
Source: Reuters