European Gas Falls on Norway Flows With Bearish Mood Picking Up

Elena Mazneva, Bloomberg News

(Bloomberg) -- European natural gas advanced as traders weighed extreme heat in parts of the continent and concerns about the little fuel Russia is still sending to the region.

Benchmark futures settled 3.9% higher after another session of sharp price moves. Searing temperatures in parts of the region and global competition for liquefied natural gas continue to provide upward pressure — even as flows from Norway, Europe’s top supplier, return to levels last seen in April.

Traders are also watching escalating tensions between Russia and Ukraine in the Black Sea, where Moscow has attacked agricultural storage facilities after halting the grain-export corridor. While there’ve been no statements that a tit-for-tat response against Russia could impact gas supplies, the market remains on edge.

In addition, more seasonal works are scheduled in Norway next month, and the market will be monitoring closely the maintenance schedule after unplanned delays already caused intense volatility in June. The recent price gains could be “attributed to the ongoing nervousness of the market,” analysts at Engie SA’s EnergyScan said in a daily note.

Dutch front-month gas, Europe’s benchmark, rose to €28.02 a megawatt-hour. The UK equivalent futures added 3.7%, while British day-ahead prices jumped amid weak wind generation. German power followed gas higher. Coal and carbon prices also advanced.

Still, ample fuel stockpiles and relatively muted industrial demand are providing a sense of energy security. Overall sentiment is still bearish, analysts at Energi Danmark said in a note. “The market is very well-supplied and does not need to save gas right now to achieve the goal of filled storages ahead of the upcoming winter,” they said.

Adding to signs of bearishness, net-short positions by investment funds in Dutch gas last week increased for the first time in more than a month, according to data published Wednesday by Intercontinental Exchange Inc. Net-shorts reached a year-to-date high in early June, but many investors later closed their positions after outages in Norway fueled sharp price spikes following months of relative calm.

--With assistance from Todd Gillespie.