Dutch and British wholesale gas prices reversed earlier losses and mostly rose on Tuesday afternoon as participants await EU plans for market intervention.
The benchmark Dutch contract for October rose by €12.45 to €202.95 per megawatt hour (MWh) by mid-afternoon. The British October contract was up by 4.75 pence at 361.75 pence per therm. Benchmark futures had earlier slipped by as much as 4.9 per cent.
The EU’s securities watchdog is considering measures to help energy firms struggling to meet rising collateral demands after they were caught out by the surging prices as Russia cut gas supplies to Europe.
“The proposed liquidity support schemes are credit-positive for utilities companies in Europe and the UK because they would help mitigate the significant, albeit temporary, liquidity pressure on the sector,” Moody’s said in a report. “Greater liquidity would also support utilities’ hedging activity.”
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The European Union is set to unveil a package of proposed emergency measures this week, with some countries calling for price caps on power and gas.
While the policy measures are being worked out, gas continues to be pumped into inventories to allay some fears over winter supply. EU gas storages have already surpassed an 80 per cent filling level targeted for November 1st, with current levels at 84 per cent and gas still being added. That is slightly above the five-year average, according to Gas Infrastructure Europe. While the heating season in the Continent officially starts in just over two weeks, some regions typically keep injecting the fuel into stockpiles as late as October before demand starts draining it.
This has outweighed the otherwise bullish price signal of the stop in Russian gas deliveries through the Nord Stream 1 pipeline, added Fabian Rønning, a senior analyst at Rystad Energy.
At the current pace of gas injections, and in the event of a normal winter, northwest European gas storage will remain 34 per cent full by the end of March even with Russia stopping supply through the Nord Stream pipeline, JPMorgan Chase said in a note. If it gets colder than average, that level could drop to 14 per cent, the bank said.
An expected drop in temperatures below normal by the end of this week should provide fundamental support, analysts at Engie EnergyScan said.
Meanwhile, Norway’s prime minister Jonas Gahr Støre will meet gas producers on Thursday to discuss long-term supply contracts that may help to stabilise prices on gas sales to Europe, he told the country’s public broadcaster NRK on Tuesday.
“It is not in Norway’s interest to have the current instability. I would much rather see those prices to stabilise, preferably at a lower level,” he added.
Mr Støre, however, repeated that setting a price cap on gas, as suggested by some European buyers, could negatively impact supplies and would be a “bad choice”.
Norway has become Europe’s top pipeline gas supplier as Russia cut its deliveries, with Moscow blaming the cuts on technical issues caused by Western sanctions over its invasion of Ukraine.
It emerged separately on Tuesday that Uniper is weighing legal proceedings before a Swedish arbitration court to claim billions of euro in compensation from Gazprom over what it says are unjustified gas supply cuts, two people familiar with the matter said.
Germany’s largest importer of Russian gas posted a €12.3 billion first-half loss and had to be bailed out by the state after reduced supplies from Gazprom forced it to buy replacement volumes at higher prices.
The Stockholm arbitration court, where the sources say Uniper would seek the claims, has repeatedly dealt with gas contract quarrels between Gazprom and its counterparts, including Poland’s PGNiG and Ukraine’s Naftogaz.
— Reuters/Bloomberg
