(Bloomberg) — European natural gas prices registered their biggest weekly decline since January, with optimism on Ukraine transit flows contributing to the bearish momentum.
Benchmark futures for December delivery closed 3.5% lower on Friday, capping a weekly drop for the front-month contract of almost 10%. That’s the biggest percentage reduction since the week ended Jan. 19.
The easing in sentiment — already dominating the market after weather forecasts for northwest Europe turned milder for the first half of November — was further intensified on signals that buyers are nearing a deal with Azerbaijan to keep supplies flowing once a Russia-Ukraine transit agreement expires at the end of the year.
The deal would employ the same pipeline network that now carries Russian gas across Ukraine to the European Union. Other details are yet to be clarified and the accord still needs to be finalized. In response, Slovakia’s SPP said it has “long supported” the continuation of flows via Ukraine and is in regular contact with its partners, though the company denied the “upcoming conclusion” of a contract, with its participation, to keep the gas flowing.
Europe’s gas market has been volatile in recent months, in part due to concern that supplies may be halted, tightening the market next year. Yet the European Commission, the EU’s executive arm, has said energy security wouldn’t be at risk after the transit deal ends. Slovakia and Austria are among the European countries that continue to import Russian supplies by pipeline.
At the same time, the milder temperatures may help to keep a lid on heating demand, and allow the region to preserve its inventories, which are more than 95% full. Other major buyers of gas in Asia, such as China and Japan, are also set to see weak demand, according to Bloomberg Intelligence, which may drag liquefied natural gas prices there lower than current levels.
Europe’s benchmark futures for December closed at €39.17 a megawatt-hour in Amsterdam.
©2024 Bloomberg L.P.
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Publish date : 2024-11-01 10:35:00
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