By Geoffrey Smith
Investing.com -- Benchmark European gas prices rose on Monday as a cold snap across the continent provided the first test of its ability to keep demand subdued in a winter without any help from its usual chief supplier, Russia.
By 11:15 ET (16:15 GMT), the front-month Dutch TTF contract, which serves as a benchmark for all of northwest Europe, was up 2.6% at €115.51 a megawatt-hour.
TTF prices have found something of a bottom in recent days, as temperatures have started to fall following a warmer-than-usual start to the peak winter heating season. A mild October had meant that buyers could continue to inject spare gas into storage longer than would have normally been the case. As such, Europe's storage facilities were over 95% full at the weekend, according to data from Gas Infrastructure Europe.
Trading in the TTF has remained active despite moves by the European Commission to cap reference prices in an effort to keep down the continent's overall fuel bill over the coming winter. The Commission's latest proposals include a fixed price ceiling and some preliminary details on what would trigger a cap.
Analysts at Rystard Energy argue that any move to limit TTF prices will distort market signals "with potential unintended consequences for supply security or demand-reduction measures." They also argue that it may prove impossible to police if trades that currently take place on Europe's exchanges move to the over-the-counter market.
One factor still supporting prices is the extended closure of the Freeport LNG facility on the Texas coast due to fire this summer. Freeport last week pushed back its expected restart date by around a month to the middle of December. Freeport LNG represents nearly 4% of the global market for liquefied natural gas when it is online.
Elsewhere Monday, there was a reminder of the competition that the EU will face in the global market if it wants to replace Russian pipeline gas in its entirety with LNG for any extended period. The gas-rich emirate of Qatar signed a long-term deal to supply China's Sinopec (OTC:SHIIY) with gas from the latest expansion of its giant North Field in the Persian Gulf. At 4 million tons a year and running for 27 years, it's the biggest supply deal ever signed by Qatar.
"Today is an important milestone for the first sales and purchase agreement (SPA) for North Field East project," Reuters quoted QatarEnergy chief Saad al-Kaabi as saying shortly before the deal signing. "It signifies long-term deals are here and important for both seller and buyer."