British and Dutch wholesale gas prices gained on Wednesday morning amid a drop in temperatures, while full storage and plentiful LNG supply limited further upside.
In Britain, the gas contract for immediate delivery TRGBNBPWKD rose by 33 pence to 75 pence/therm by 1000 GMT, while the next-day delivery contract TRGBNBPD1 was up 39 pence at 83 pence/therm.
In the Dutch market, the day-ahead contract TRNLTTFD1 gained 21 euros to 42 euros per megawatt hour (MWh).
In the UK, the gas system was 2.2 million cubic metres (mcm) per day under-supplied, according to National Grid data.
Heating demand in Britain should lift amid a drop in temperatures in the coming days, although temperatures are expected to rise significantly above normal again from Saturday, according to Refinitiv data.
“Barring the fall in temperatures over the coming days, bullish drivers remain in short supply on the prompt,” Refinitiv analyst Wayne Bryan said in a morning note.
Full gas storage sites across Europe and plentiful liquefied natural gas (LNG) supply continues to cap gains to prices, analysts said.
The European benchmark, Dutch front-month contract TRNLTTFMc1 was 9.75 euros higher at 126.50 euros/MWh.
Supply risks remain in Europe since storage inventories alone would not be enough to meet demand during a normal winter, Ole Hvalbye, an analyst at SEB research, said in a note.
“If we assume that gas flow remains at the current level (which is also a best case) and demand continues its elastic behaviour, we are currently 270 TWh (terawatt-hours) short exiting the winter,” he added.
However, every warmer-than-normal day with reduced gas consumption and delayed start of inventory withdrawal was reducing the risk, Hvalbye said.
“All in all, we continue to see strong prices during the winter, and a remaining high in 2023,” he added.
SEB has lowered its fourth quarter Dutch TTF price forecast to 161 euros/MWh, from 225 euros/MWh, but maintains its first quarter 2023 outlook of 215 euros/MWh.
In the European carbon market, the benchmark contract CFI2Zc1 was 1.38 euros higher at 78.10 euros a tonne.
Source: Reuters (Reporting by Nora Buli in Oslo; Editing by Susanna Twidale)