AMSTERDAM: European natural gas prices have risen as colder weather is forecast for the end of next week, testing the region’s readiness for winter.

Benchmark futures gained 4.1% last Friday, rebounding after a dramatic slide a day earlier.

Bloomberg reported last Thursday that Kyiv was in talks about supplying Azeri gas to Europe as a transit deal with Moscow nears expiry.

Still, uncertainty persists over whether an agreement can be reached.

The aggregated volume of Dutch gas futures contracts reached the highest since at least the end of 2013 last Thursday.

A handful of European countries such as Slovakia and Austria continue to receive Russian gas via Ukraine.

While an end to the transit accord in its current form is almost inevitable, the region’s stockpiles are brimming and efforts to source alternative supplies continue, including from Azerbaijan.

Prices “are likely to take direction from developments surrounding the potential transit agreement between Ukraine and Azerbaijan,” consulting firm Inspired Plc said in a note.

“If a deal is reached, markets could be exposed to more downside, though it may be limited by markets already dropping.”

The continent needs to attract 54% of the global flexible liquefied natural gas supply pool this winter, down from 56% last winter, BloombergNEF said this week.

“In the event of an extremely cold winter for both north Asia and north-west Europe, Europe is likely to fully deplete its storage and would need to fiercely compete for spot LNG,” BloombergNEF analyst Lujia Cao said in a report. 

  - Bloomberg