European natural gas prices posted a fourth consecutive weekly loss with mild weather helping to ease the region’s energy crisis.
(Bloomberg) — European natural gas prices posted a fourth consecutive weekly loss with mild weather helping to ease the region’s energy crisis.
Benchmark Dutch front-month futures settled 4% lower at €69.53 per megawatt-hour, posting an 8.9% weekly drop. The UK equivalent also declined.
Energy costs have been a key driver of inflation, and unexpectedly low demand is easing the burden on consumers and sparking optimism among European authorities. After record prices last year and fears that governments would have to resort to rationing, the mild winter is helping the region keep inventories at healthy levels.
Record-Hot Winter Gives Europe Breathing Room on Energy Crisis
European stockpiles are 83% full — above the five-year seasonal norm for this time of year — with some nations even sending gas into storage in recent days. In Germany, the region’s largest economy, that level is about 91%, according to Gas Infrastructure Europe.
“We are very optimistic, which we weren’t really back in the fall,” Klaus Mueller, president of Germany’s network regulator, said in an interview with public broadcaster ARD, adding that a gas shortage this winter is unlikely. “The more gas we have in storage facilities at the beginning of the year, the less stress and cost we will face in filling them again for next winter.”
German Gas Demand Slumped in 2022 as Mild Weather Blunted Crisis
Residential, commercial, and industrial gas-users have all been reducing their demand over winter to reduce costs. Even with a cold-snap in the beginning of December, pan-European demand was 11% below the five-year average last month, ICIS data show.
Still, risks remain. Prices are still higher than normal and the continent is exposed to any further supply disruptions, with the global markets fundamentally short of gas this year amid lower flows from Russia. Supplies of liquefied natural gas will be limited, with no new major export projects starting in the near term. Competition with Asia for the fuel could also increase.
“The fundamentals haven’t changed,” said Graham Freedman, an analyst at consultancy Wood Mackenzie Ltd. “We still have the rest of the winter to get through and supply risks are still there.”
–With assistance from Anna Shiryaevskaya.
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