Nov 20, 2023
Europe Gas Jumps After Seized Vessel in Red Sea Stirs War Fears
Bloomberg News
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(Bloomberg) -- European natural gas prices rose as forecasts for colder weather added to rising tensions in the Middle East, following the seizure of a ship over the weekend.
Benchmark futures halted four-sessions of declines, increasing as much as 6.9% before paring some of the gains. The contract is still trading in a narrow range near €50 a megawatt-hour, its level for much of the last few weeks.
Temperatures across much of northwest Europe are set to drop below normal levels toward the end of the month, which could boost demand for heating. Separately, a vessel seized in the Red Sea by Iran-backed Houthi rebels on Sunday has raised concerns that the Israel-Hamas war could lead to broader shipping disruptions.
So far, the transport of energy projects has been largely unaffected by the conflict. Still, the Red Sea, including the Suez Canal, is one of the world’s busiest shipping routes. Tankers from Qatar, a top exporter of liquefied natural gas, regularly pass through the region on the way to Europe.
“At present, anything that might conceivably be a problem seems to cause a price increase,” Jonathan Stern, a distinguished research fellow at the Oxford Institute for Energy Studies, said. “Potentially the conflict could widen and that could potentially disrupt flows from Qatar to Europe, but at present there’s no sign of anything like this happening.”
Read More: Seized Vessel in Red Sea Renews Fears of Shipping Disruptions
The market is also “catching up” to Friday’s jump in crude oil prices — which also advanced slightly Monday — ahead of a meeting of the OPEC+ alliance later this week, according to Ole Sloth Hansen, head of commodity strategy at Saxo Bank AS.
Europe is heading into winter with full storage sites and ample LNG imports, but the continent remains vulnerable to supply risks after last year’s energy crisis saw Russia curb pipeline gas flows.
Dutch front-month futures, Europe’s gas benchmark, rose 3.4% to €46.58 a megawatt-hour at 11:15 a.m. in Amsterdam.
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