LIVE MARKETS-Could Europe run out of gas?

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COULD EUROPE RUN OUT OF GAS?

The short answer is no, probably not, but there are risks that some countries or areas could face a shortage should a cold snap hit Europe, according to Citi.

U.S. nat gas futures NGc1 have jumped a 56% in the last two days on expectations that a cold front is going to boost heating demand in the coming weeks, but the supply situation in Europe is arguably just as interesting.

Front month European TTF futures TRNLTTFMc1 have surged 30% over the last week, as supply shortages are driving prices higher, and temperatures look set to be colder-than-average this January.

"Markets were increasingly concerned that Europe may run out of natural gas inventories before winter ends," Citi gas and power analyst Maggie Xueting Lin said in a note.

However, Lin believes that European end-of-March gas inventories are likely to (only) drop to 15%-20% full, if February and March are as cold as 2018; therefore it is unlikely that Europe will run out of gas storage.

"Nonetheless, imbalanced distribution of gas storage capacities combined with pipeline bottlenecks mean that some countries or areas may still be at risk of running out of gas supplies," Lin adds, noting that French levels could be of concern.

Other countries at risk include Ireland, UK, Sweden and Belgium. These "stand out as the most vulnerable countries in terms remaining gas storage measured in days of winter demand covered," Lin says.

"None of these four countries have enough gas storage to cover even one week of demand in winter."

(Samuel Indyk)

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