European natural gas rose as traders turned their attention to forecasts for hotter weather next month, which is likely to stimulate demand, even as supply risks remain.
Benchmark futures increased as much as 4.9%. Temperatures in northwest Europe, where the biggest gas consumers are located, will return to above normal by the middle of July. Madrid is seen hitting 36C (96.8F) on Tuesday and Wednesday, according to Maxar Technologies Inc.
“The focus seems to shift more strongly on weather forecasts for July, where temperatures above the norm across Europe could potentially increase energy demand for cooling purposes,” Energi Danmark said in a note.
Attention is also on supply with projects in top provider Norway undergoing prolonged maintenance. Europe is also vulnerable to disruptions at global liquefied natural gas facilities over the summer, as customers are heavily dependent on the superchilled fuel after Russian pipeline gas deliveries dwindled.
Flows to Cheneire Energy Inc.’s Corpus Christi LNG plant in the US declined Tuesday, potentially indicating an issue at the facility. American suppliers have been crucial in filling any gaps in Europe since the war started in Ukraine.
Total LNG arrivals to the continent are well above seasonal norms, even though they have slipped in June. Inventories are also far fuller than average, which provides a safety net against any supply interruptions.
Dutch front-month gas, Europe’s benchmark, was up 1.5% at €32.45 a megawatt-hour at 10:43 a.m. in Amsterdam. The UK equivalent contract rose 1.7%.
Stimulate Demand
The market will be closely watching if the summer will be hot enough to stimulate gas demand that has been sluggish so far.
“The heat wave will increase electricity consumption this week, but Europe’s power demand remains subdued in 2023, despite lower prices,” BloombergNEF said in a note on Monday.
Over the first six months of the year, power demand has been 7% below BNEF’s seasonally adjusted model, which predicts consumption based on actual temperature levels, it said. Clean energy generation is growing, with renewables surpassing power output from fossil fuels last month following rapid capacity expansion, the analysts said.
--With assistance from Stephen Stapczynski and Priscila Azevedo Rocha.