European Gas, Power Extend Slump as LNG Supplies Promise Relief

(Bloomberg) -- European natural gas fell for a fourth day as U.S. supplies are expected to bring relief to the tight market and traders weighed both milder weather and risks to demand from the omicron variant. 

Gas has whipsawed in recent days, soaring to record levels above 180 euros ($203.59) a megawatt-hour last Tuesday following a sharp drop in Russian flows. That’s 10 times higher than year-earlier prices. It slumped to about half that level on Monday -- and is heading for the longest declining streak in two months -- as shipments of liquefied natural gas head to Europe, easing an energy crunch that’s forced heavy industries to curb output.

“As we enter the closing stages of 2021, the European energy complex shows no sign of calming down for the holiday period,” consultant Timera Energy said in a report. “Industrial demand has been struggling in response, with metals and fertilizer producers having to curtail production.”

Benchmark Dutch front-month gas fell as much as 19% to 90 euros a megawatt-hour, the lowest since Dec. 6, and closed 3.2% lower. Easing prices are pushing down power rates, with German electricity for January declining as much as 36% to 220 euros per megawatt-hour while French power for next month fell 28%. 

More LNG

An increasing number of LNG vessels are heading to western European ports. The region is attracting more supplies as Asia’s biggest buyers are opting to use their inventories this winter instead of procuring more. 

Milder weather forecast for much of mainland Europe will curb energy demand, while there was also uncertainty over the impact of the fast-spreading omicron. Coronavirus infections has been surging across the globe, and over the weekend China reported the highest number of cases since January. 

Also see: Russia Sends Less Gas to EU as Buyers Hit Supply Limits Early

Still, there is no immediate end in sight for the energy crisis that has rattled European industry and induced government action to ease the burden of surging household bills. Russia’s Gazprom PJSC again didn’t book any gas capacity at Germany’s Mallnow for Tuesday, which means flows into Europe are likely to remain restricted.

Gazprom has been supplying clients at home at full tilt as “abnormally low” temperatures sweep across Russia, it said Monday. Gas flows are above its average output levels, and daily withdrawals from its underground storages in the country have climbed to a five-year high in the last few days, the company said. 

More stories like this are available on bloomberg.com

©2021 Bloomberg L.P.