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European natural gas prices dropped to the lowest levels in over two years as demand was hit further by record solar power in Germany.
Benchmark futures tumbled as much as 4.3%. Gas posted its longest stretch of weekly declines since 2007 on Friday, a sharp turnaround from the energy crisis that had taken prices to unprecedented levels last year. There’s little indication the slide will end soon as industries continue to struggle amid a weak economic environment.
Renewables are also taking pressure off gas for power generation with Germany setting a record for solar over the weekend. In the wake of the war in Ukraine, the nation brought forward by more than a decade to 2035 its goal of getting to 100% renewable power in an effort to cut its reliance on gas. BloombergNEF forecasts that wind and solar will reach 76% of total generation by 2030.
Much of the European Union’s increase in solar installations is aimed at moving “away from costly fossil fuels at a faster rate and avoid further exposure to the energy price hikes and security threats that occurred over the last 18 to 24 months,” said Sarah Brown, Europe program lead at energy think tank Ember.
Dutch front-month gas, Europe’s benchmark, was 1.6% lower at €24.17 per megawatt-hour at 9:40 a.m. in Amsterdam. The UK equivalent contract fell 2.7%.
Gas reserves are far fuller than normal at 68% and are likely to be fully replenished much earlier than usual. It would reduce much of the supply risks for the next winter, providing further bearish pressure on prices.
Asian liquefied natural gas prices have also dropped to their lowest levels in more than two years, with traders struggling to pinpoint the bottom on stuttering Chinese demand and ample supply.
