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Europe Gas Extends Slide as Crisis Eases on Supply and Reserves
(Bloomberg) -- European natural gas headed for a third day of declines as ample supplies and reserves, along with the return of milder weather, help to ease the region’s energy crisis.
Benchmark futures fell as much as 3.1% in early trading. The continent’s gas demand is expected to soften in the next few days, with temperatures forecast to rebound following a cold snap. There are also expectations for more liquefied natural gas, as a key export terminal in the US is taking steps to restart.
Strong LNG shipments and healthy gas stockpiles — which are far above normal thanks to reduced consumption and a relatively mild winter — have significantly eased fuel prices over the past few weeks. That’s leading some politicians and economists to suggest the worst of Europe’s energy crunch is over.
“We can afford to be more optimistic,” analysts at Deutsche Bank AG said in a note this week. “Gas storage is up and gas prices are down. Inflation is falling and uncertainty is declining.”
Dutch front-month gas, Europe’s benchmark, traded 3% lower at €56.50 a megawatt-hour by 8:31 a.m. in Amsterdam. The contract has lost about 25% so far this month.
Pipeline supplies from Norway are rising following a maintenance-related drop, also adding to bearish sentiment, though more works at the country’s facilities are scheduled this month.
Sill, traders remain focused on uncertainty over demand in China. The country’s economic recovery could keep the market tight this year, Meg O’Neill, chief executive officer of Woodside Energy Group Ltd. (OTC:WOPEY), Australia’s biggest exporter, said Wednesday.
While risks remain, prices in Europe are expected to stay within a range of €50 to €100 this year, according to Deutsche Bank.
©2023 Bloomberg L.P.
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