European natural gas prices fell further from the lowest close in almost two years as a weak regional economy hits the prospects for demand.
Germany suffered a recession in the first quarter, highlighting the continent’s struggle in emerging from a crisis that was partially created by record-high energy costs last year. Industrial demand for gas in Europe has been sluggish despite the recent dip in prices, resulting in an oversupplied market.
Much fuller-than-normal inventories and strong availability of liquefied natural gas are also quickly taking away any risk for the next winter. At the same time, the 60 per cent slide in gas futures this year has brought some relief for Europeans suffering from surging inflation. British consumers are set to see lower energy bills.
The market is now oversupplied, according to Philippe Francois, a senior portfolio manager at Danske Commodities A/S. If nothing changes that, prices will likely shift lower again in July, he said.
Current prices are also doing little to spur Chinese buying, where a flagging economic revival is undermining fuel demand. The country’s biggest LNG importers are noticeably absent from the spot market, and are even offering to sell shipments, according to traders. While some smaller buyers in the region are starting to take advantage of cheaper gas, that’s not been enough to counter the overall weakness.
Dutch front-month gas, Europe’s benchmark, fell 3.1 per cent to €26.92 per megawatt-hour at 10:31 a.m. in Amsterdam. It slumped almost eight per cent in the previous three sessions. The UK equivalent contract slid 3.4 per cent on Thursday.
© 2023 Bloomberg L.P.