(Bloomberg) -- European natural gas prices settled at their highest level in six weeks, with unusually frigid weather expected to start eroding gas inventories and outages occurring at a few key facilities on Tuesday.
The freeze will be the region’s first real test of its resiliency amid the energy crisis this season, as mild temperatures so far have curbed demand for heating. With Russia cutting most of its gas supplies to Europe in the fallout over Moscow’s war in Ukraine, the continent is set to delve further into its stockpiles that it has spent months accumulating.
“The market has woken up from its slumber, with large gains made currently,” analysts at DB Group Europe said in a note. “Latest weather forecasts show temperatures starting to drop below seasonal normal across parts of Northern Europe next week and gas inventories are expected to start declining.”
Storage sites are still about 94% full on average, according to Gas Infrastructure Europe, due to the recent weather and a massive effort to import liquefied natural gas. Before the war began in February upended supplies, Russian state-controlled company Gazprom PJSC supplied about a third of all gas consumed in Europe.
Process issues at the Troll field in Norway and the UK’s Barrow North terminal on Tuesday also helped to buoy prices. The Karsto processing plant in Norway is set to start maintenance on Wednesday.
Meanwhile, European Union countries remain polarized on the issue of a natural gas price cap before an emergency meeting of energy ministers later this month, according to EU energy commissioner Kadri Simson.
The cap isn’t meant to be an instrument to “structurally lower our gas prices to pre-war levels,” Simson told lawmakers at the parliament’s industry committee. That will only be achieved when the region lowers its gas demand, she said.
Dutch front-month futures, the European benchmark, settled up 7.3% at €132.29 per megawatt-hour, the highest since Oct. 14. The UK equivalent contract also jumped.
--With assistance from Elena Mazneva.
©2022 Bloomberg L.P.