Europe’s natural gas fluctuates as winter approaches

Europe's natural gas fluctuated with the end of a short-lived cold spell in sight, while healthy stockpiles are helping to tackle any boost in demand.

Benchmark futures swung between small gains and losses after falling as much as 2.3% earlier in the day. The chilly weather in parts of western and central Europe is increasing gas consumption, coupled with low wind output. The forecaster Maxar Technologies Inc said temperatures are expected to rebound soon and could remain above seasonal norms for the next two weeks.

Prices have declined more than 20% this year, and are close to levels seen before the Russian invasion of Ukraine. There is a reduction in consumption by industries and a mostly mild winter that has resulted in the need to tap into underground storage, which is well above the average levels of the last five years.

The analysis platform of Engie SA, EnergyScan, said in a daily note that prices have found an equilibrium around their current levels. Any drop below that level could cause a rebound in demand from power generation and industry. Consumption discipline is key for Europe as it can no longer depend on large volumes of Russian pipeline gas, coupled with steady supplies of liquefied natural gas, which rose to record high levels during the winter. The fragile balance might be disrupted, as traders are watching for signs the fragile balance might be disrupted after prices eased significantly from last year s records.

Dutch front-month gas, Europe's benchmark, was down 0.6% at €57.75 a megawatt-hour by 11: 10 a.m. in Amsterdam, mostly similar to its moves a day earlier in the day. The UK equivalent contract increased by 0.2%, reversing an earlier decline.

Supplies to Europe are healthy. Some parts of Turkey's local gas network were hit after a series of disastrous earthquakes earlier this week, but there have been no reports on damage to major infrastructure, including a pipeline that is still delivering Russian gas to southern parts of the European Union.

Concerns about the broader energy market keep appearing. Electricite de France SA halted a nuclear reactor for nine months, adding to worries about the reliability of the country's atomic fleet, the backbone of Europe's electricity system. It could increase demand for gas for power generation and keep the market volatile.

The Resolution Foundation think tank said in a note Tuesday that "we can't assume energy prices will continue to fall, and they could well rise from their current levels, with the outlook still dependent on temperatures in Europe and the unpredictable situation in Ukraine.

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