European gas slips again as ample supplies help to soften crisis

EUROPEAN natural gas fell for a third day as ample supplies and the return of milder weather helped to ease the region’s energy crisis. 

Benchmark futures declined as much as 4.8 per cent before paring the loss. Demand is expected to soften in the next few days, with temperatures forecast to rebound following a cold snap. There are also expectations for more liquefied natural gas (LNG), as a key export terminal in the US takes steps to restart. 

Strong LNG shipments and healthy gas stockpiles – which are well above normal thanks to reduced consumption and a relatively mild winter – have significantly eased fuel prices over the past few weeks. That is leading some politicians and economists to suggest that the worst of Europe’s energy crunch is over. 

“We can afford to be more optimistic,” analysts at Deutsche Bank said this week. “Gas storage is up and gas prices are down. Inflation is falling and uncertainty is declining.” 

The business outlook for Europe’s biggest economy, Germany, brightened as the recession many feared looks increasingly less likely, as indicated by data from the Munich-based Ifo Institute. “The most important risk for the German economy was a gas-rationing scenario,” the institute’s president Clemens Fuest said on Wednesday (Jan 25). “That risk is off the table now.”

Dutch front-month gas, the continent’s benchmark, traded 1.1 per cent lower at 57.61 euros per MWh by 11.47am in Amsterdam. The contract has lost about 25 per cent so far this month. The UK equivalent contract was down 0.7 per cent.

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Pipeline supplies from Norway are rising following a maintenance-related drop, also adding to bearish sentiment, though more works at the country’s facilities are scheduled this month.

Sill, traders remain focused on uncertainty over demand in China. The country’s economic recovery could keep the market tight this year, said Meg O’Neill, chief executive officer of Woodside Energy, Australia’s biggest exporter.

While risks remain, prices in Europe are expected to stay within a range of 50 euros to 100 euros this year, said Deutsche Bank. That is a steep decline from last year’s peaks, although still higher than historic averages. BLOOMBERG