European gas trade nears 2024 peak, attracts LNG imports

Concerns about Russian pipeline supplies kept European natural gas prices near their highest levels since December, providing an incentive for higher imports by sea.

Benchmark futures fluctuated around 40 euros per megawatt hour on Monday after recording a double-digit weekly increase for the second consecutive day on Friday.

Russian gas continues to flow through the Sudzha border crossing even after Ukrainian troops launched a surprise border crossing last week. Separately, Ukraine said late Sunday that Russian troops had set a fire at the site of the occupied Zaporizhzhia nuclear power plant, although radiation levels at the plant appear to be normal.

Increased gas prices in the crucial supply season are likely to divert more liquefied natural gas to the region from the U.S., Europe’s biggest supplier of the fuel. Europe’s LNG imports collapsed in July, while Asia received the most monthly U.S. cargoes since 2021, ship-tracking data compiled by Bloomberg show.

Weaker demand for LNG in Asia this month – partly due to falling temperatures – and increased geopolitical risk in the Middle East are changing the profitability of LNG shipping routes and “opening up the possibility of diverting more U.S. cargo to Europe,” according to S&P Global Commodity Insights.

Nevertheless, competition for LNG with Asia remains fierce, as last month showed how quickly Europe’s supply of the fuel could dry up. Heatwaves, particularly in Asia, have boosted demand in the region.

“The big issue is the upcoming winter,” says Tom Roberts, CEO of London-based Xterna Group, which analyzes energy data. “The focus right now seems to be on geopolitics in general, but these gas-intensive countries are consuming record amounts of gas.”

Dutch front-month futures, Europe’s gas benchmark, rose 0.2 percent to 40.55 euros per megawatt hour by 10:05 a.m. in Amsterdam.