Europe’s benchmark natural gas prices fell for a second day in a row on Tuesday amid tepid industrial demand and comfortable inventories.
The front-month futures at the TTF hub, the benchmark for Europe’s gas trading, fell by 5.6% to $31.64 (29.295 euros) per megawatt-hour (MWh) as of 10:37 a.m. GMT on Tuesday.
Prices extended Monday’s losses following a rise last week, which was triggered by supply challenges with maintenance at Norwegian gas fields and a French LNG import terminal. Last week, European gas prices were volatile due to supply outages and hotter weather in some parts of Europe which raised demand for cooling.
European prices are now much lower than the August 2022 record-high of over $324 (300 euros) per MWh.
But industrial gas demand is still weak, despite the lowest natural gas prices in two years. Europe’s natural gas demand is estimated to have fallen by 9.7% in May from a year earlier as industries are slowing and major economies enter a recession.
This year, prices have eased to the levels from before the energy crisis that began in the autumn of 2021 and peaked in 2022 after the Russian invasion of Ukraine. However, the lowest prices in around two years haven’t spurred gas consumption because industries and economies in Europe are slowing.
Germany and the Eurozone are now officially in recession, pointing to potentially weak industrial demand going forward.
Another bearish factor is the high level of gas in storage for this time of the year, compared to the five-year average.
As of June 11, storage sites across the EU were 72% full on average, according to data from Gas Infrastructure Europe.
Citigroup expects European and Asian gas prices to average 50% below current levels in the third quarter, due to tepid demand and resilient supply, the bank’s analysts said last week.
By Tsvetana Paraskova for Oilprice.com