European Gas Lows to 16-Months on Strong Supply Outlook

(Bloomberg). Natural gas prices in Europe fell to the lowest level since September 20,21. This was due to a positive supply outlook, with full stockpiles of LNG in China encouraging buyers to send LNG cargoes.

Bloomberg Most Read

On Monday, Benchmark futures dropped as much as 15%, bringing the total decline this year to 27%. Due to low prices and high inventories, Chinese importers are trying divert February and March shipment to Europe. That’s easing concerns that the reopening of China’s economy will boost demand and pull cargoes away from the west.

After a turbulent year last year, when energy prices soared to record levels and economic collapsed across the globe, gas markets are now more calm. Europe has begun to see signs of hope that the worst is over. Inflation will begin to decrease and fears about a recession will recede.

The main contributor has been the prolonged spell of mild temperatures. While a cold snap is expected this week, it’s likely to be brief and won’t be strong enough to dent gas inventories that have barely been touched over the last month as demand remains in check and LNG imports are strong.

“There currently appears to be no end to the losses on the European gas market,” Energi Danmark said in a note on the website. “The panic-like situation from last year has been replaced by confidence that Europe will get through this winter without any supply issues.”

How Europe Is Muddling Through Putin’s Energy War: QuickTake

Still, some are warning that the crisis that was triggered by Russia’s deep supply cuts following the invasion of Ukraine is far from over. Europe has been “lucky” with the weather, and supply remains exposed to geopolitical events, Iberdrola SA’s Chairman Ignacio Sanchez Galan said. While gas prices may have dropped slightly, they still nearly double the average price for that time of year over five years.

Also read: Europe’s Energy Crisis Isn’t Over Yet, Iberdrola Chief Says

The gas market is receiving help from other sources for the moment. The European gas market is seeing less dependence on natural gas. Germany produced an unprecedented amount of wind power Saturday, while Britain reached a new record last week.

Dutch front-month gas futures, Europe’s benchmark, slipped 14% to €55.48 a megawatt-hour at 3:49 p.m. in Amsterdam. They dropped for the fifth week straight on Friday. The equivalent contract in the UK fell 15% on Monday.

Click here for the Europe Energy Crunch blog

Bloomberg Businessweek: Most Read

©2023 Bloomberg L.P.