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European natural gas slipped with the end of a short-lived cold spell in sight while healthy stockpiles are helping tackle any boost in demand.
Benchmark futures fell as much as 2.3%, after two days of modest gains. The ongoing chilly weather in parts of western and central Europe, coupled with low wind output, is raising gas consumption. But temperatures are expected to rebound soon and could remain above seasonal norms for the next two weeks, according to forecaster Maxar Technologies Inc.
Prices have declined about 25% this year, and are hovering near levels last seen before the Russian invasion of Ukraine. Reduced consumption by industries and a mostly mild winter have reduced the need to tap into underground storage, which remains well above the average levels of the last five years.
Steady supplies of liquefied natural gas — which rose to record high levels at one time during the winter — along with consumption discipline are key for Europe as it can no longer rely on large volumes of Russian pipeline gas. Traders are closely watching for any signs the fragile balance might be disrupted as the recent price drop brings back industrial demand.
“The huge volatility in gas prices over the past year means we can’t assume energy prices will continue to fall, and they could well rise from their current levels with the outlook still dependent on temperatures in Europe and the unpredictable situation in Ukraine,” the Resolution Foundation think tank said in a note Tuesday.
Dutch front-month gas, Europe’s benchmark, was 2% lower at €56.95 a megawatt-hour by 8:35 a.m. in Amsterdam. The UK equivalent contract slipped as much as 1.4%.
