Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

Natural Gas: Prices Could Test Last Year's Lows on Ample Storage, Warm Weather

Published 02/22/2024, 06:07 AM
Updated 09/02/2020, 02:05 AM
  • Demand for natural gas in Europe is falling, and a peak in LNG prices is on the horizon.
  • Warmer-than-expected winter, and increased supply diversification favor price declines as well.
  • As a result, bears could be targeting the lows near the 20 euro price level.
  • In 2024, invest like the big funds from the comfort of your home with our AI-powered ProPicks stock selection tool. Learn more here>>

Europe can breathe a sigh of relief as indications suggest that the continent might not face supply issues in the next winter.

The gas market reflects this situation, with the Dutch TTF futures trending downwards towards last year's lows, which lies just above 20 euros per MMBtu.

A warm second part of the heating season and forecasts of relatively high temperatures in the coming months further favor the European economy.

Increased diversification of supply has aided this, which made sure that the continent isn't depending on Russian gas alone.

Natural Gas Continues to Be a Vital Component of the European Energy Mix

The broader European economy, particularly European Union countries, has successfully reduced natural gas consumption by about 20% between 2021 and 2023.

Germany has led with a 17.6 billion cubic meter drop in demand, contributing to the overall European consumption of 452 billion cubic meters.

Factors include widespread energy savings in industrial production, higher average temperatures, and an increase in renewable energy use.

LNG imports by sea, especially from the US, Qatar, and Russia, have seen a notable increase. Europen gas demand is estimated to peak in 2025, after which it is expected to consistently decrease in favor of renewable energy sources (RES).

The US administration has recognized this trend, halting further export licenses due to the fear of declining European demand.

What's Behind the Recent Decline in Prices?

The recent decline in natural gas prices at the Dutch TTF hub in the new year is influenced by two key elements.

Firstly, data show that France and Germany are experiencing some of the warmest winters in the last 34 years.

Additionally, deliveries from the Troll field in Norway and a storage facility average fill of 67.87% should prove useful in the next few months.

Barring potential supply-chain disruptions, there are no significant factors on the horizon threatening a return of the energy crisis threat in Europe.

The clear downward trend in natural gas prices at the Dutch TTF hub is excellent news for the European economy.

Overcoming last year's low, which is located at around 23 euros per MMBtu is the key focus for bears.

Technical View

If the bearish scenario occurs, prices may drop to around 20 euros per MMBtu, returning to pre-Ukraine war levels.

Dutch TTF Natural Gas Futures

Considering the aforementioned factors, the bearish scenario is highly probable.

***

Take your investing game to the next level in 2024 with ProPicks

Institutions and billionaire investors worldwide are already well ahead of the game when it comes to AI-powered investing, extensively using, customizing, and developing it to bulk up their returns and minimize losses.

Now, InvestingPro users can do just the same from the comfort of their own homes with our new flagship AI-powered stock-picking tool: ProPicks.

With our six strategies, including the flagship "Tech Titans," which outperformed the market by a lofty 1,183% over the last decade, investors have the best selection of stocks in the market at the tip of their fingers every month.

Subscribe here and never miss a bull market again!

Subscribe Today!

Now with CODE INWESTUJPRO1 you can get as much as a 10% discount on InvestingPro annual and two-year subscriptions.

Disclaimer: This article is written for informational purposes only; it does not constitute a solicitation, offer, advice, or recommendation to invest as such it is not intended to incentivize the purchase of assets in any way. I would like to remind you that any type of asset, is evaluated from multiple points of view and is highly risky and therefore, any investment decision and the associated risk remains with the investor.

Latest comments

Youre so wrong on your shallow analysis.
You are too late, it already tested there.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.