(Bloomberg) — European natural gas prices plunged from a record close after Russia topped up fuel to the region at the last minute.
Dutch next-month futures fell as much as 16%, with the move from Russia easing supply fears already alleviated by expectations of more liquefied natural gas cargoes reaching the continent. Weather forecasts are also indicating that a cold snap from next week won’t last as long as previously expected.
The market is still headed for its longest run of weekly gains since July as storage levels are at their lowest ever for this time of year, promising a tough winter with plenty of more volatility to come. Traders remain unsure of what Russia’s supply strategy will be given increasing political tensions with the west over Ukraine.
“Whatever the unknown reason for the late booking is, it very clearly highlights the problem Europe is facing with rapidly falling stocks,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
Gazprom PJSC booked about 30% of pipeline space to deliver gas from Russia toward Germany through Poland in within-day auctions overnight. Earlier on Thursday, for the first time this month, there had been no allocations at all in day-ahead auctions.
The below-normal temperatures in Europe are now forecast to end before Christmas, according to The Weather Co. forecasts on Bloomberg.
Benchmark Dutch front-month gas fell as low as 120.60 euros a megawatt-hour and traded at 127 euros by 10 a.m. in Amsterdam. It’s still up about 20% this week, the most since October, as Russia’s supplies remain below last year’s levels and its new controversial pipeline Nord Stream 2 is facing delays.
The U.K. month-ahead contract was down 11% at 319.01 pence a therm, also heading for a straight seventh weekly gain.
Read more: Germany Says No Decision on Nord Stream 2 Link Before July
Gas shipments into Germany’s Mallnow, which handles supplies from Russia via the Yamal-Europe pipeline running across Belarus and Poland, are below levels for the past two days after the recent booking but are within their 10-day average flows.
On Monday, traders will be watching monthly auctions for transit capacity, which will give an indication of Gazprom’s plans for supplies next month.
If Russia finally decides “to turn up the taps” after keeping exports limited to long-term contract obligations, Dutch gas can quickly slump toward the 80-euro level, said Hansen.
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