European Gas Prices Slide Further as Demand Is Slow to Recover

(Bloomberg) -- European natural gas prices declined for a third session amid lackluster demand, even as uncertainty remains about the full restart of LNG terminals in France.

Dutch front-month futures posted a weekly loss of almost 10%, with trading shortened by the Easter holidays. The UK equivalent also slumped, widening its discount to the continental Europe hub. 

Europe’s gas stockpiles are well-above seasonal levels following a mild winter, despite much of the continent experiencing a relatively cool spring. Still, the region is recovering from a historic energy crisis, with many consumers limiting their use over recent months. Gas consumption in Asia, a rival market, also remains muted. 

“Demand has not recovered despite the partial price normalization,” analysts at Morgan Stanley said in a note Wednesday. It may take a while to rebound due to structural demand destruction and the lag between wholesale power prices and retail tariffs for end-consumers.

Britain’s Stockpiles

In the UK, storage is at 62% of capacity at the end of the winter, much fuller than usual, according to data from Gas Infrastructure Europe. An influx of liquefied natural gas arrivals shows no sign of easing as cargoes divert away from French import terminals amid strikes there. 

A total of 21 LNG cargoes are already confirmed for April, which is “greatly increasing UK supply prospects and is offering downside to near-curve UK gas contracts,” Inspired Energy said in a note. 

Still, “a level of uncertainty” remains, especially for the upcoming winter, the consultant added. “This is likely down to the fact that UK storage, even when full, can only provide gas for roughly 12 days, which is relatively weak compared to some EU counterparts.”

The nation is exporting gas to mainland Europe with volumes surging this month as shippers resumed exports though the BBL pipeline to the Netherlands — in addition to the larger link, the Interconnector to Belgium.

Meanwhile, it’s not clear when French LNG import facilities will resume full operations, having been affected by strikes since early March. 

The Montoir terminal made its first send-outs Wednesday, according to data from operator Elengy SA, which said deliveries also resumed at a minimum rate at its Fos Tonkin terminal.

However, two tankers that were due to unload at Montoir Wednesday and Thursday are diverting away, ship-tracking data on Bloomberg show. Dunkerque LNG had limited capacity Thursday due to a strike. 

Dutch front-month gas futures fell 3.3% to €43.13 a megawatt-hour at settlement. The UK equivalent declined 4.1% to 102.31 pence a therm, equivalent to €39.71 a megawatt-hour.

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