European gas prices fell further on Thursday, continuing a recent sell-off, as unusually mild weather curbed demand and new fuel supplies headed to the region.
In sparse holiday trading, gas futures linked to TTF, the wholesale price of European gas, fell 12% to €84.90/megawatt hour as tankers naturalized gas. liquid – originally supplied to Asia – to Europe.
These ships were rerouting earlier this month by traders to cash in at record prices, reaching above €180 per megawatt-hour in the run-up to Christmas as confidence in Russia’s additional supply wanes.
Alex Froley, LNG analyst at consulting firm ICIS, said LNG carrier Rosenrot had left the US on a route to China but changed course on Thursday and headed to the Netherlands instead.
“The mild weather and increased LNG flows helped drag prices lower last week,” he said. “However, if there are periods of cold weather in Europe or Asia during the remaining months of winter, the market could still bounce back.”
In the UK, wholesale gas prices fell 10% to 210 pence a can on Thursday, extending losses from last week’s record high of 450 pence a can to more than 50%.
Despite the decline, European gas prices are still up more than 350% this year, increasing energy bills for households and industries across the continent and adding to inflationary pressures.
The market in Europe is more “balanced” as at least 800,000 tonnes of LNG spread across 11 tankers are diverted from Asia to Europe, said Kaushal Ramesh, senior analyst at Rystad Energy.
However, he said the gas market was still “not out of the woods” with flows on a key pipeline between Russia and Europe in reverse mode for a week and a half.
“Diversion of LNG from Asia is a useful measure, but not a sustainable substitute for a steady supply of pipelines,” he said.
More than a third of EU gas supplies come from Russia via pipelines, but capital outflows this year have declined. Russia’s state-owned Gazprom has refused to sell more volumes to Europe beyond those mentioned in the long-term contracts.
Some European politicians and industry experts have accused Russia of withholding supplies to press EU leaders to approve the controversial new pipeline. Nord Stream 2.
Gazprom has repeatedly denied these claims. Over the weekend, the company said allegations of low gas deliveries to the EU in order to manipulate prices were “lies and untrue”.
Along with mild weather, demand for gas has also been constrained by some of Europe’s biggest energy users restricting production at plants and smelters due to rising electricity prices.
On Wednesday, US industrial group Alcoa said it would end primary aluminum production at its San Ciprian smelter in Spain for two years due to high energy costs. For the same reason, Norsk Hydro on Thursday announced plans to cut capacity at a plant in Slovakia to around 60% of capacity.
With gas inventories across Europe well below the seasonal average, traders expect gas and electricity markets to remain volatile for months to come.
Germany is on track to shut down three of its last six nuclear power plants on Friday as it turns to renewables, while France could face power shortages in the event of a cold. next month when a large number of nuclear reactors are out of maintenance, the country’s grid operator warning on Thursday.
https://www.ft.com/content/f3dc46be-9de5-41d5-9f04-462ce58691f2 European gas prices continue to fall in holiday sell-off