EUROPE GAS-European gas prices follow oil markets lower

Updates prices, change to market direction

Gas prices fall after oil-market drop, reversing earlier gains

Weaker gas demand expected amid higher temperatures, strong renewable output

LONDON, May 18 (Reuters) - European gas prices fell on Monday afternoon, tracking a dip in the oil market, after an Iranian news report said the United States has accepted waiving sanctions on Iranian crude oil temporarily.

The benchmark Dutch front-month contract at the TTF hub TFMBMc1 was down 1.032 euros at 49.135 euros per megawatt hour (MWh), or around $16.75/mmBtu, by 13.35 GMT, ICE data showed.

The contract briefly touched 52.44 euros/MWh in early trade on Monday, its highest level since April 7.

The British June contract NGLNMc1 was down 3.06 pence at 120.6 pence per therm.

Prices had risen in the morning after drone attacks on the UAE and Saudi Arabia and rhetoric from the U.S. and Iran raised concerns about a possible escalation in the conflict.

However, prices retreated in the afternoon mirroring the fall in crude oil, which was down around 1.4% after having earlier hit its highest level since May 5.

Oil can have an impact on gas rates as many LNG and pipeline gas contracts are index-linked to oil prices.

Higher temperatures and strong renewable output are also leading to weaker demand for gas.

“The fundamental picture in north-west Europe is overwhelmingly bearish over the next two weeks, with a lot softer demand forecast than was earlier expected due to higher temperatures, as well as strong solar output and a spike in wind speeds tomorrow,” LSEG analyst Yuriy Onyshkiv said in a daily research note.

Local distribution zone demand, which includes home heating, is forecast to decline by 233 gigawatt hours per day to 1,235 GWh/d for the day-ahead, LSEG data showed.

In the European carbon market, the benchmark contract CFI2Zc1 was up 0.15 euro at 75.75 euros a metric ton.


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