(Bloomberg) -- European natural gas rebounded as forecasts showed the weather turning cooler than previously estimated next week.
Benchmark futures for March jumped as much as 11%. Some models estimate temperatures will drop again after a warm spell, potentially boosting gas usage in heating and forcing more withdrawals from fuller-than-normal storage sites. Maxar Technologies (NYSE:MAXR) sees cooler conditions in northern and central Europe next week, but still close to average levels for the time of year.
Snaps of cold weather are keeping the energy crisis alive, even though much of the sting has gone out. Gas prices are heading for a second monthly decline, and confidence is mounting that inflation has passed its peak and a recession could be averted. But the market is still sensitive to any signs of increase in consumption and the weather has been the main driver.
“Lower demand for gas, with plenty in storage, had reduced risk until this point,” said Tim Partridge, head of energy trading at Zenergi Group. But “pockets” of colder weather, together with some outages recently, are still supporting near-term prices, he said.
Benchmark Dutch gas for March was 9.1% higher at €60.15 a megawatt-hour by 9:23 a.m. in Amsterdam. The UK equivalent contract added 8.7%.
ING Groep expects prices to average in the region of €60 to €65 over the first half of 2023, increasing to as much as €80 in the second half. While that’s higher than current levels, it’s far below last year when gas rose to record highs.
“It certainly isn’t looking as dire as it did just several months ago,” the bank said in a note this week. But there are two key risks — a full halt to already curbed pipeline flows from Russia, and Chinese demand for liquefied natural gas.
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