European natural gas prices declined as demand in the region remains subdued despite the first signs of progress on restocking inventories ahead of next winter.
(Bloomberg) — European natural gas prices declined as demand in the region remains subdued despite the first signs of progress on restocking inventories ahead of next winter.
Benchmark futures fell as much as 2% on Tuesday, extending losses from the previous four weeks. While the euro area managed to avoid an energy-induced winter recession, recent economic data has underlined the patchy strength of its recovery, as well as deteriorating confidence among manufacturers.
Traders are closely looking for signs of a pickup in industrial gas demand as prices have plunged about 50% since the start of the year. While Europe drew heavily on liquefied natural gas after Russia throttled pipeline flows last summer, the number of vessels carrying the fuel that have stayed on the water for 20 days or more has been steady in recent days at 34, data compiled by Bloomberg show.
Europe was “in a way saved” this winter by mild weather and weak Chinese demand for LNG due to Covid restrictions, Anton van Heesewijk, head of trading strategy at Jera Global Markets, said at the Flame gas conference in Amsterdam on Tuesday. “But will this last?”
Some demand destruction was permanent due to capacity closures, and some was price sensitive and may return, he said. “There’s a lot of uncertainty out there.”
European gas stockpiles are now almost 60% full and well above the average of the past five years. Energy giant BP Plc said earlier Tuesday it expects European gas and Asian LNG prices to be supported by those refilling efforts, as well as recovering Chinese demand and coal-to-gas switching.
Meanwhile, the Nordic region is set to get another bout of winter weather later this week, which could boost heating demand and energy prices.
Dutch front-month futures, Europe’s gas benchmark, declined 1.6% to €38.21 a megawatt-hour by 11:13 a.m. in Amsterdam. The UK equivalent contract fell 2.5%. German power for next month dropped 2.5%, following gas downward.
–With assistance from Elena Mazneva and Todd Gillespie.
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