ALBAWABA – European gas prices rose as the Netherlands have begun preparations to permanently close a major gas field, Bloomberg reported.
Meanwhile, outages have been tightening the region’s supplies as the current heat wave has been driving up demand.
Benchmark futures spiked as much as 30 percent, to their highest level since early April, before retreating and losing most of those gains. Prices have surged more than 50 percent in June, according to Bloomberg.
Even as the European Union (EU) amasses an unusually high gas stockpile in preparation for next winter, the planned field closure has rattled the market ahead of what could be a really hot summer.
The Dutch field, Groningen, could be closed down by October this year.
All of Europe is working on revamping its gas supply chains and networks, Bloomberg underscored, after Russia curbed supplies in the fallout of the Ukraine war.
Despite elevated levels of gas import, EU is still in competition with Asia over the fuel.
Groningen hasn’t been a major contributor to Europe’s supplies. Meanwhile, works at some major Norwegian facilities are set to continue into July, according to the New York-based news agency.
Closing the field is not good news for the energy sector or for governments and central banks engaged in fighting off high inflation.
“Closing the field is, again, not good news for energy prices and security of supply,” Jilles van den Beukel, an energy specialist at The Hague Centre for Strategic Studies, said on Twitter.
The decision to close down the field will be made official later this month, sources have told Bloomberg.
The government had previously announced plans to shut down the field by October 2024, at the latest, depending on the geopolitical situation.
A decision to close the field isn’t entirely irrevocable, the sources reassured Bloomberg,
It would take about two weeks to reopen wells in the event of a crisis or very cold winter, they said.
Concerns about LNG supplies to Europe and Norwegian outages “have been the physical triggers” for rising prices said James Waddell, head of European gas and global LNG at consultant Energy Aspects Ltd.
“But we have to remember that a lot of the market was short going into this month and price rises will have triggered stop-outs, thereby driving the price even higher.”
Dutch front-month gas, the benchmark for Europe, rose 3.8 percent to €39.77 a megawatt-hour by 2:52 p.m. in Amsterdam. The UK equivalent contract added 3.7 percent.
