European natural gas prices again moved higher on Monday as forecasts grew colder and higher carbon prices supported the commodity. 

Both the Dutch Title Transfer Facility and the UK’s National Balancing Point climbed higher last week. Very cold temperatures are forecast for the northern half of Europe over the next week, while the 11- to 15-day outlook is trending below normal as well, according to Maxar’s Weather Desk. 

Meanwhile, warmer weather and Lunar New Year holidays that are to begin later this week are taking a bite out of Asian demand. Spot prices in Asia are moving closer to the $7 range, falling for the third straight week from record highs earlier this winter. LNG cargoes are now making their way back to Europe in a market reversal after vessels were diverted to Asia last month to meet soaring demand amid a historic cold snap. 

“Higher demand will raise some concerns about rapid storage withdrawals, however, a rebound in LNG imports could offset some of the price upside,” said Schneider Electric analyst Balint Balazs of European fundamentals. 

Underground natural gas storage in Europe stood at 48.4% on Saturday, below the five-year average of 51%. European carbon prices hit record highs last week, which makes gas more competitive with coal.

“Surging carbon prices are dragging switching levels higher and with them European gas hub prices,” said the UK-based consultancy Timera Energy. 

Parts of the United States are also bracing for some of the coldest weather this winter over the next two weeks. EBW Analytics Group said the next four storage withdrawals are likely to total more than 850 Bcf, reducing storage by nearly one-third. Prompt natural gas prices at Henry Hub, which averaged $3.375/MMBtu on Friday, “are likely to rise significantly further, pushing futures up sharply by the end of the week,” EBW said.

As prices climb higher in Europe and U.S. loadings slated for the continent have rebounded, inclement weather along the Gulf Coast this week could disrupt vessel traffic. Moran Shipping said there’s a high risk for sea fog between Monday and Thursday at ports along the Gulf Coast this week. U.S. feed gas deliveries were up slightly from weekend levels to 11.30 Bcf on Monday, according to NGI data

In other news last week, Bloomberg reported that LNG vessels and tonnage transiting the Panama Canal hit record highs last month amid the rally in Asia. Fifty-eight vessels weighing a combined 6.74 million tons (Mt) moved through the canal, up from the previous record of 54 tankers that carried a combined 6.23 Mt in November. 

In Europe, the Russian ship Fortuna has reportedly resumed laying pipe for Nord Stream 2 despite U.S. sanctions that were imposed on the pipeline by the Trump administration in its last days. The work has restarted in Danish waters on the 5.3 Bcf/d system that would run from Russia to Germany in a test of the Biden administration, which has signaled support for ongoing sanctions. 

Meanwhile, German utility Uniper SE said it’s studying the feasibility of a large-scale green hydrogen production plant in the Netherlands. Uniper is working with the Port of Rotterdam Authority to explore the possibility of a plant at the company’s Maasvlakte area site in Rotterdam.

The utility said the site is an ideal location for the production of green hydrogen as renewable electricity from offshore wind farms is planned to come ashore there. In the production of green hydrogen, renewable energy is used to split water into hydrogen and oxygen. This process is called electrolysis.

European regulators are pushing to install more renewable hydrogen capacity, posing challenges for increased LNG growth on the continent. Like LNG, hydrogen can be chilled and liquefied for transport on ships. It can also be blended with natural gas in the pipeline stream to reduce carbon emissions.As the list of countries and companies targeting net-zero emissions gets longer, hydrogen is gaining in popularity. As part of an initiative to ensure hydrogen plays a role in the U.S. energy transition, a coalition of 11 companies announced last week the formation of a trade group called Hydrogen Forward.