Total open interest in Europe’s benchmark gas futures surged to a record high this week, exchange data compiled by Bloomberg showed on Friday, in a sign that the lull in European gas trading could be over with the colder weather.
The market has become more liquid in recent days, and Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, early this week broke out of the narrow trading range they have stayed for months. The prices jumped on Monday, as traders expect colder temperatures to raise heating demand across Europe as soon as next week.
The EU had its gas storage sites at nearly 83% full as of October 8, according to data by Gas Infrastructure Europe, but an early cold snap could force some countries to draw from storage sooner than they may have expected. Some countries, including Germany and France, have most recently withdrawn gas volumes from storage, the data showed.
On Friday, the TTF futures were down by 1.3% as of 11:45 a.m. in Amsterdam, retreating to their trading range of the past months.
Steady LNG flows into Europe in recent weeks have eased concerns that an early cold snap could begin sapping gas inventories before the EU has the chance to fill them up ahead of the winter.
Europe is filling inventories, but the rate of filling is lagging behind last year’s levels after a cold winter sapped more volumes from reserves.
This summer, LNG demand in Asia has been tepid, allowing Europe to draw a lot of U.S. LNG cargoes. The weakness in Asian LNG demand has been welcome news for Europe as the EU scrambles to fill up inventories going into the winter.
Yet, some traders are betting that Europe’s natural gas prices would surge by 60% from current levels by next summer, amid many uncertainties on the market months from now.
By Tsvetana Paraskova for Oilprice.com
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