European natural gas prices fell as markets reacted positively to Saudi Arabia's plan to repair a damaged oil pipeline. According to Sina Finance, the plan is expected to restore about half of the East-West pipeline's capacity within days and bring full operations back within six weeks.
The benchmark gas futures contract fell as much as 2.5% on Thursday, driven by oil-linked contracts. Traders are also rushing to refill Europe's already low storage facilities ahead of the heating season, even though gas prices are still about 10% higher than at the start of the month.
The article said the ongoing conflict in the Middle East has cut off about one-fifth of global liquefied natural gas supply, with no sign that those supplies will recover soon. It also noted that mild weather across continental Europe is providing some support to prices, while meteorological agencies and traders increasingly expect temperatures in the U.K. and northwestern Europe this autumn and winter to be above average.
Anna Maria Jaller-Makarewicz, Europe chief energy analyst at the Institute for Energy Economics and Financial Analysis, wrote in a report that wind power output and temperatures will determine how tight Europe's natural gas supply is this winter and how much room prices have to rise. Europe's gas storage facilities were slightly above 68% full, well below the seasonal average, and implied volatility in near-term futures, measured from the price of the underlying options, recently surged to nearly 100%.