European natural gas futures headed for a second session of declines as concerns about fuel output from Israel eased and weather forecasts pointed to a mild week ahead.
Benchmark contracts dropped after losing 3% last week. Over the weekend, Israel ordered Chevron Corp. to resume output at its major Tamar field, which was shut last month after the Oct. 7 attack by Hamas militants. Flows to neighboring Egypt were halted as a result, limiting its ability to supply liquefied natural gas to Europe.
Windy weather and temperatures above seasonal norms are expected in parts of Europe this week, exerting additional pressure on prices. Wind farms covered more than 50% of the UK’s energy mix early Monday, with weather warnings in place for Ireland and Britain as the newly named Storm Debi expands in the area.
Read More: Storm Debi Threatens Flooding and Travel Disruption to UK
While the continent is on relatively stable footing as it heads into the winter — with gas storage facilities more than 99% full — it remains vulnerable to supply disruptions and uncertain demand prospects. Europe is still working to ensure its energy security after Russia curtailed its flows of pipeline gas last year, which sent prices to record highs.
For now, Goldman Sachs Group Inc. analysts expect European gas prices to remain “flat” in the next few months. But “supply disruptions, a colder winter, and reduced conservation are upside risks to our forecast,” researchers led by Samantha Dart said in a note.
While industrial gas usage has remained muted in 2023, there have been some upticks in the sector’s consumption compared to the previous year, a trend which is expected to accelerate in the fourth quarter, according to the Goldman analysts. Should there be supply disruptions, gas prices may rise to levels that incentivize switching to fuel oil or distillates, they said, which could occur if they hit between €60 to €90 per megawatt-hour.
Dutch front-month gas, Europe’s benchmark, traded 1.8% lower at €45.81 a megawatt-hours by 9:04 a.m. in Amsterdam. The UK equivalent contract slid 1.7%.
