Natural Gas Prices Rise on European Field Closure, Higher Temps
Jun 15, 2023
Natural gas prices rose sharply on Thursday, with U.S. futures (/NG) rising about 9% to the highest level in over three weeks, while European prices at the Title Transfer Facility (TTF) gained about 7.5% to the highest point since April. Meanwhile, the Asian benchmark—Japan Korea Marker—remained relatively subdued during overnight trading, up about 1%.
Thursday’s Price action is being driven by news out of Europe after the Dutch government announced that the Groningen field will close on October 1. The gasfield in the Netherlands is among Europe’s largest domestic suppliers of the vital energy resource, underscoring the supply concerns at a time when the continent relies on imported liquefied natural gas (LNG), primarily from the United States.
The field is set to be shut no later than this October after heavy local opposition due to earthquakes forced government leaders to speed up the closure, previously set for October 2024. One positive is that the higher European prices compared to Asia have increased the amount of seaborne supply, which should help to fill Europe’s supply buffer before the winter.
However, if Europe’s energy situation worsens going into the winter, the closure may be postponed. But, for now, energy traders are bidding prices higher on the news. Meanwhile, European weather models show an increased likelihood for higher cooling demand as temperature outlooks show higher mercury readings over the coming weeks.
U.S. futures are being supported by extreme temperatures across the Southern U.S., particularly in Texas, and the outlook supports further cooling demand, which should keep prices supported. The NOAA’s 8-14 Day Temperature Outlook sees an above-normal probability for above-average temperatures from the Midwest down into the Southern Plains.
While inventory levels are healthy, currently near the 5-year maximum range, according to the Energy Information Administration (EIA), supply fell short of estimates for the week ending June 09. The EIA’s Weekly Natural Gas Storage Report showed a build of 84 billion cubic feet (bcf) compared to estimates calling for 95 bcf. Evolving weather forecasts will play a big role in dictating price action.
Natural gas futures are showing healthy upward momentum on the daily chart, with today’s move slicing above the 50-day Simple Moving Average (SMA). However, prices have stalled at the 61.8% Fibonacci retracement level from the May high/low move after launching from around the 38.2% retracement. A daily close above the SMA could set the stage for bulls to keep pressing higher, but after today’s move, a pullback may also be warranted.
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