Dutch and British gas wholesale contracts posted slight gains on Friday supported by concerns over a widening conflict in the Middle East, but mild weather and healthy supply continue to limit the upside to prices.

The benchmark front-month contract at the Dutch TTF hub was up 0.43 euros at 31.35 euros per megawatt hour (MWh) by 0955, with the March contract up 0.45 euros at 31.40 euros/MWh, LSEG data showed.

Further in, the Dutch day-ahead contract gained 0.22 euros to 31.05 euros/MWh.

In Britain, the front-month contract gained 1.02 pence to 77.75 pence per therm.

The market staging a minor rebound after several days of decline, likely because of the Western air strikes in Yemen, analysts at Energi Danmark said in their morning report.

On Thursday, the United States and Britain carried out air and sea strikes on Houthi military targets in Yemen in response to attacks by the Iran-backed group on shipping in the Red Sea, increasing concerns about a broader conflict in the Middle East.

However, with no hard winter weather in sight, strong supply and a potential upcoming period of low demand, the gas market could see further losses in the future, Energi Danmark’s analysts added.

Recent colder weather across parts of Europe has seen a greater depletion of gas storages, but around 82% full, they remain above the 5-year average of around 70% for this time of year, ING analysts said in a note.

“Our balance still assumes that we finish the current heating season with storage over 50% full, which suggests limited upside to prices,” they added.

Temperatures in northwest Europe are forecast to average 1.3 Celsius next week, up from 0.4 Celsius in the current session, with heating demand to drop as well, LSEG data showed.

In the European carbon market, the benchmark contract CFI2Zc1 gained 0.38 euros to 68.30 euros a metric ton.
Source: Reuters (Reporting by Nora Buli in Oslo; Editing by Emelia Sithole-Matarise)