• 4 minutes Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
  • 6 minutes UAE says four vessels subjected to 'sabotage' near Fujairah port
  • 13 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 15 minutes Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 10 hours Wonders of Shale- Gas,bringing investments and jobs to the US
  • 10 mins Trump bogged down in Mideast quagmire. US spent $Trillions, lost Thousands of lives, and lost goodwill. FOR WHAT? US interests ? WHAT INTEREST ? . . . . China greatest threat next 50 years.
  • 7 hours Why is Strait of Hormuz the World's Most Important Oil Artery
  • 5 hours California's Oil Industry Collapses Despite Shale Boom
  • 4 hours North Dakota oil output totals 1.39 million b/d in March, up 4% on month: state
  • 2 hours Misunderstanding between USA and Iran the cause of current stand off, I call BS
  • 3 hours Rural and Conservative: Polish Towns Go 'LGBT free' Ahead Of Bitter European Election Campaign
  • 3 hours Global Warming Making The Rich Richer
  • 9 hours IMO2020 To scrub or not to scrub
  • 10 hours Knock-Knock: Aircraft Carrier Seen As Barometer Of Tensions With Iran
  • 14 hours Crude oil?
  • 7 hours Iceland Reducing Gas Stations By Half By 2025
  • 2 hours Compensation For A Trade War: Argentina’s Financial Crisis Creates An Opportunity For China
  • 10 hours "We cannot be relying on fossil fuels to burn as an energy source at all in our country" - Canadian NDP Political Leader
Alt Text

Canada’s Natural Gas Crisis Is Going Under The Radar

Canadian natural gas producers continue…

Alt Text

Natural Gas Markets Remain Ultra Tight

Natural gas prices exploded on…

Alt Text

Lower Gas Prices Are Right Around The Corner

Gasoline prices usually fall after…

Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

More Info

Trending Discussions

The Easy Money In European Natural Gas Is Gone

At the end of last winter’s heating season, it was an unusually cold spell that upended European natural gas markets, with storage levels falling below average and prices firming up as demand shot up.

At the end of this winter’s heating season, it is the unusually mild weather in most of Western Europe for most of the winter that has driven natural gas prices down and left supplies higher than the seasonal average.

The summer gas futures at the Dutch TTF hub have declined by 16 percent so far this year and have been trading lately around the lowest in 10 months. The winter gas futures contract, however, has dropped by just one third of the decline in the summer contract, according to data from ICE Endex compiled by Bloomberg.  

So the discount of the Dutch summer natural gas futures to the winter contract widened to the biggest since 2011 as of early March. Typically, such a wide spread would mean that one of the most common European gas trades—buying cheaper gas futures in the summer to sell in the winter—would be the most profitable in eight years.

However, traders are unable to take full advantage of the wide winter-summer spread because several factors have combined this winter season to create a perfect storm in the European natural gas markets. These factors are higher stockpiles than usual, limited available storage capacity as most of it is booked out amid declining overall capacity, and increased liquefied natural gas (LNG) shipments to Europe as Asian LNG spot prices continue to tumble.

First, unlike last year’s winter, this winter has been unusually mild in many parts in Western Europe. This has led to lower natural gas demand and lower withdrawal from storage—a stark contrast compared to the 2018 winter. Related: The Next Major Flashpoint For U.S. Shale

The cold spell in Europe at the end of February and early March of 2018 led to record withdrawals in the first quarter of 2018, and storage levels dropped to 18 percent of capacity—well below the five-year range—the European Commission (EC) said in its Q1 Quarterly Report on European gas markets. By the end of the winter season, natural gas stock levels dropped below 10 percent of capacity in countries such as Belgium, France, and the Netherlands, where high gas demand from the UK contributed to strong withdrawals.

Before the 2019 winter season began, the European market was tight amid higher demand in the summer’s heat wave, while natural gas stockpiles were still lower than usual after the winter of 2018, one of the coldest winters in the past decade.  

Natural gas prices in the UK surged to the highest for a summer season, with Europe’s natural gas market the most bullish in years, as higher-than-expected summer demand and a tighter market drove natural gas price futures to levels last seen during the winter’s supply crunch.

But the 2019 winter has been quite a different story. The UK, for example, registered its warmest February on record, with daily maximum temperatures the highest on record dating back to 1910, according to the UK’s Met Office.

Due to the warmer winter, natural gas stockpiles across Europe are now higher than the typical levels for this time of the year. What’s left of the storage capacity is nearly “sold out”, according to analysts who spoke to Bloomberg. Related: Is This As Good As It Gets For Oil?

“We are going into this summer with full storage, among the highest in years,” Wayne Bryan, a trader and analyst at Alfa Energy in London, told Bloomberg, noting that he wasn’t buying anything at the moment.

In addition, Europe’s total storage capacity has declined by more than 4 percent since 2016, according to data from gas industry trade association Gas Infrastructure Europe, cited by Bloomberg.

As a result, higher-than-usual gas stocks in European storage and almost fully booked storage space have been preventing natural gas traders from profiting from the most profitable price differential between winter and summer gas futures contracts in years.

By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News