Benchmark natural gas prices in Europe continued to fall on Wednesday, extending several weeks of losses amid weak demand in the spring and higher-than-normal inventories after the end of the winter.
The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, fell by 1.5% to $30.84 (28.68 euros) per megawatt-hour (MWh) as of 10.33 a.m. GMT on Wednesday.
That’s the lowest price since November 2021, when the energy crisis in Europe started ahead of the 2021/2022 winter season, with the crisis reaching a peak later in 2022 after the Russian invasion of Ukraine and the lack of most of Russia’s pipeline gas supply sent prices soaring.
Currently, demand for natural gas in Europe is weak after the winter heating season ended and summer demand is yet to begin. Gas consumption from industry, which went through a very rough patch last autumn and winter, is also weak.
Inventories, on the other hand, are comfortably high for this time of the year. As of May 22, natural gas storage sites in the EU were 66.22% full, according to data from Gas Infrastructure Europe. The level of gas in storage is the highest for this time of the year in at least a decade.
High inventories ahead of the summer and weak demand suggest that the worst of the energy crisis in Europe could be behind us.
Yet, analysts and officials warn that the EU shouldn’t be complacent ahead of the next winter season.
Despite the slump in Europe’s gas prices this year, the continent is “not out of the woods” yet as three factors could worsen the European energy crisis later this year, Fatih Birol, the executive director of the International Energy Agency (IEA), told CNBC this weekend.
Expected higher LNG demand in China after the reopening, the possibility of a U.S. default, and the remaining dependence on Russian gas are three reasons why Europe shouldn’t be complacent ahead of the 2023/2034 winter, the IEA’s top executive warned.
By Tsvetana Paraskova for Oilprice.com
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