European natural gas prices declined as traders weighed supply risks against a mild weather forecast for October, according to Bloomberg.
The November contract fell as much as 3.5% after gaining at the start of trading on Monday. Temperatures are forecast to be well above seasonal norms in northwest Europe through most of October, while gas continues to be injected at storage sites, which are now over 95% full.
Europe is entering the fourth quarter with unusually warm weather, a prospect that will help to preserve fuel stocks as it delays the need for heating. But the continent is still vulnerable to outages and other supply risks after last year’s historic energy crisis.
Algerian gas flows to Italy have been lower than usual since Sunday, according to data from Italy’s transmission system operator. And in the Netherlands, extraction from the Groningen gas field in the northeastern Netherlands stopped on Oct. 1 as planned, after the damaging impact of earthquakes.
While those and other factors are weighing on supply for now, gas and power demand is expected to be higher in the fourth quarter than a year ago, according to analysts at S&P Global Commodity Insights. They see gas needs rising by 5.9%, after being mostly subdued this year as manufacturers and households curbed consumption.
“Europe anticipates the first significant year-on-year gains in gas and power demand since the crisis, but prices remain sensitive to supply disruptions,” the analysts said in a report on Friday.
With Europe having replaced much of the gas it used to receive via pipeline from Russia with liquefied cargoes, uncertainty also surrounds calls to restrict such flows from Russia.
Dutch front-month futures for November delivery, fell 2.4% to €40.86 a megawatt-hour at 10:14 a.m. in Amsterdam. The equivalent UK contract also declined after initial gains.