Natural gas prices in Europe fall as wind power grows

Benchmark natural gas prices fell around midday local time on Tuesday as the region’s first cooler wave brought plenty of wind and fueled a higher share of electricity in key markets.

Dutch firm TTF Natural Gas Futures, the benchmark for gas trading in Europe, fell 2.4 percent to $40.17 (36.43 euros) per megawatt-hour (MWh) at 11:41 a.m. in Amsterdam.

Gas prices were set for their first daily decline in four trading days on the back of higher wind power output, which is generally limiting demand for gas for electricity.

However, Europe’s first autumn temperatures could boost gas demand in the coming days amid tight supply with maintenance at some Norwegian export facilities and higher LNG prices in Asia driving cargo out of Europe.

Stronger demand for liquefied natural gas in Asia is pulling more supply to the Asian continent, leaving lower volumes for Europe, where prices are depressed relative to Asian spot prices.

European gas prices are set for volatility in the coming hours and days amid further supply concerns and a possible increase in demand if wind power production in northern Europe weakens.

European gas traders are closely watching Tropical Storm Francine in the US Gulf of Mexico, which is strengthening and expected to become a hurricane on Tuesday and make landfall in Louisiana on Wednesday. Francine could reach near Cameron, Louisiana, where some of the newest LNG export facilities in the US have been built.

If the hurricane disrupts US LNG exports, gas prices in Europe could rise. Francine is expected to bring heavy rains and the risk of significant flooding to much of Louisiana and Mississippi through Thursday, the National Hurricane Center said Tuesday morning.

European gas storage is 93% full, according to data from Gas Infrastructure Europe. This provides some assurance of supply ahead of the winter heating season.

But stored gas would not cover Europe’s needs for a winter, so traders are watching potential supply disruptions as price drivers.

By Charles Kennedy for Oilprice.com

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