- Benchmark futures drop to lowest level since before the war
- Price decline eases pressure on politicians, central banks
According to Bloomberg article published on January 4, 2023, natural gas prices in Europe extended declines as warm weather curbs demand and eases pressure on politicians and central bankers.
Benchmark futures fell as much as 8.7% to the lowest since mid-February last year. Mild conditions have spread across the region, with major cities like Berlin earlier recording their warmest start to the year. While cooler temperatures are expected in some parts next week, central and southern Europe is forecast to remain unseasonably warm.
The warm spell has reduced the need for heating and alleviated concerns over gas inventories being depleted too quickly. Prices have dropped to about half of the average for 2022, a boon for policymakers and consumers who have struggled with surging bills over the past year, and for central banks that have been forced to boost interest rates to quell inflation.
“The European markets face now a massive underconsumption, combined with oversupply,” said Niek van Kouteren, lead trader at Dutch energy company PZEM NV. “Storages have been filled again over the last two weeks.”
Gas demand has also eased with strong wind power production in recent days. German wind output is near a record, while the UK produced unprecedented levels at the end of last year. At the same time, ample supplies of liquefied natural gas — with the first full cargo arriving at Germany’s new import terminal in Wilhelmshaven — have also kept prices in check.
Dutch front-month gas futures were 7.6% lower at €66.79 a megawatt-hour as of 2:42 p.m. in Amsterdam, after dropping 6.1% on Tuesday. The UK equivalent contract fell as much as 7.7%.
“As long as the forecasts do not show any winter weather, further losses appear likely,” analysts at trading firm Energi Danmark A/S said in a note.
Still, governments continue to urge people to keep saving energy. Despite the recent mild weather, much of the winter still lies ahead, and gas prices remain well above the five-year average for the time of the time.
