Wholesale gas prices slide by 8% across Europe
Far Storage Is Year Gas Across Full, Seasonal 70%, Above Five Of Gas Europe Infrastructure The To According 84% Europe Norm
A warmer-than-expected start to winter in large parts of the world that could linger for weeks is easing fears over gas supplies that had been predicted to trigger outages and add to power bills.
Gas futures are plummeting on reduced fuel consumption and the weaker outlook. The spot prices of wholesale continental European gas slid 8% to €70.80 per megawatt hour, the equivalent British contract also fell 8%, while US prices dropped as much as 12% on Tuesday.
Gas storage across Europe is 84% full, far above the five-year seasonal norm of 70%, according to Gas Infrastructure Europe.
Forecasts point to temperatures above seasonal norms for most of Europe and the US over the next several weeks.
It’ll also be more mild across much of China — the world’s biggest gas importer — over the next 10 days, and Tokyo may see a temperature spike around mid-January.
Governments and utilities had been bracing for gas shortages after Russia invaded Ukraine last year, disrupting energy deliveries and lifting global demand for liquefied natural gas.
Prices for gas and coal hit a record as importers rushed to stockpile fuel for winter, when consumption peaks.
Those efforts to build inventories mean the biggest consumers are now sitting on comfortable supplies. In fact, Germany was able to add more gas into storage at the end of December as a mix of warmer weather and lower activity during the holiday season trimmed fuel use.
Gas stocks there are now above 90% full, after slipping to a season low of 87% before Christmas.
Part of the reason for the milder temperatures in what’s usually the coldest month of the year is that the polar vortex winds are keeping the frigid air bottled up further north, AccuWeather’s Mr Anderson said. It’s allowed mild air off the Pacific Ocean to flow across the US, keeping the cold at bay.
“We don’t see any weakening and as long as it stays strong, most of the cold stays up over the polar region,” Mr Anderson said.
Wind has also been reducing stress on the Europe’s energy systems. Germany is expected to produce near-record wind power on Wednesday, according to a Bloomberg model, curbing the need for gas to produce electricity.
Demand destruction in recent months has helped to balance the gas market.
Some industrial consumers in Europe lowered or halted output because they didn’t want to pay high prices, while emerging nations such as Pakistan and Bangladesh stopped importing liquefied natural gas because they could no longer afford it.
The impact in China of a surge in Covid cases should add to the muted picture, keeping gas demand lower there for the next few months, according to traders.
Still, there are risks ahead from any unexpected bouts of extreme weather. A prolonged blast of late-winter cold could drain gas inventories and catapult fuel prices higher.
Utilities will also soon need to begin planning to avoid shortages again next winter as they adjust to a lack of Russian fuel.