European natural gas prices edged lower as mild weather is set to return next week, further muting demand.
(Bloomberg) — European natural gas prices edged lower as mild weather is set to return next week, further muting demand.
Benchmark futures slipped as much as 6.1%, trading near the lowest levels in 16 months.
Europe has navigated the start to the winter without severe shortages, thanks mainly to above-normal temperatures, ample global supplies and reduced consumption. Asian demand hasn’t yet rebounded, though focus remains on China’s recovery. Inflation in the UK, driven by higher energy costs, is also starting to ease.
The region’s storage sites are around 81% full, some 20 percentage points above the five-year average. That’s providing confidence that Europe will end the winter with inventories over 50% and “more than enough gas to completely replenish its storage by the start of next winter,” Arun Toora and Stefan Ulrich, analysts at BloombergNEF said in a report.
The “recent crash in prices is not expected to be enough to rekindle demand for liquefied natural gas in Asia, and demand destruction in Europe, particularly in the power sector, continues,” they added.
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Still, production outages from Australia to the US to Nigeria may affect global supply. Freeport LNG, a liquefaction plant in Texas, is yet to return from a prolonged shutdown after an explosion in June.
Dutch front-month futures, Europe’s gas benchmark, fell 5.9% to €56.50 a megawatt-hour by 8:41 a.m. in Amsterdam.
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