Europe’s benchmark natural gas prices rose early on Thursday as the maintenance season on gas infrastructure in Norway, the top supplier to Europe, began.
Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, were rising by 2% as of 12:15 p.m. Amsterdam time on Thursday.
Yearly maintenance works started this week on the Kollsnes gas processing plant in Norway, which limits pipeline gas flows to Europe from Norway, its single largest gas supplier.
Three years ago, Norway replaced Russia as the biggest gas supplier to Europe after Russian pipeline deliveries were halted to most EU countries in the wake of the Russian invasion of Ukraine.
Norway currently accounts for around a third of Europe’s gas imports. The yearly maintenance in the summer months reduces flows, so Europe may have to resort to more LNG imports to fill its gas storage target ahead of the winter.
With stocks depleted below the five-year average at the end of a cold 2024/2025 winter, Europe will need more gas to refill storage this summer to adequate levels.
To ease the pressure, the EU earlier this year agreed to give more flexibility to the natural gas storage goals by expanding the period in which countries should have 90% full storage ahead of the winter and could deviate by up to 10% from the filling target.
Another market development is also easing the pressure on Europe’s gas refill, at least for now.
LNG demand in Asia, including in China, is weak, giving Europe the edge in spot LNG supply.
Traders and analysts will be watching closely the pace of Europe’s storage refills in the coming months, as well as LNG demand in Asia and whether North Asian demand would rise and potentially compete for spot cargoes with Europe. If Asian LNG markets strengthen in the period of peak summer power demand, Europe may have to pay higher prices for gas in preparation for the winter.
By Charles Kennedy for Oilprice.com
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