European gas prices drop as weather is predicted to warm up
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NATURAL gas prices in Europe extended losses on Thursday (Nov 17), as weather forecasts pointed to warmer temperatures, signalling that the start of the region’s heating season could be pushed out further.
Benchmark futures declined as much as 10.2 per cent, following a slump of 8.2 per cent on Wednesday. Warmer weather is expected in Scandinavia, while above-normal temperatures are seen for south-west Europe next week, Maxar said in a report.
Traders are keeping a close eye on weather trends as Europe’s gas storage is almost full, which should serve as a buffer for the winter. Mild temperatures and strong LNG flows have eased supply concerns in recent weeks, but stocks could be quickly depleted if a sudden cold snap boosts demand.
Several analysts predict Europe will be able to go through its first winter with curbed Russian supplies – if the weather remains mild. But volatility remains and gas prices are still more than three times above the average of the last five years. Experts and authorities have continued to urge the population to save energy.
“We are in a better situation, but that doesn’t mean we should relax,” Catherine MacGregor, chief executive officer of Engie, said at the Bloomberg New Economy Forum in Singapore on Thursday. “On prices, one can expect continued volatility.”
Meanwhile, the European Union is continuing talks about ways to limit spikes in gas prices ahead of a meeting of energy ministers next week. The exact parameters to trigger a so-called market correction mechanism on the Dutch Title Transfer Facility would be fixed upfront to avoid lengthy decision-making procedures, said a European Commission document shared with member states on Tuesday.
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Dutch front-month futures, Europe’s gas benchmark, fell 7.5 per cent to 105 euros (S$149.62) a megawatt-hour as at 9.05 am in Amsterdam. BLOOMBERG
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