Gas prices fall on weak demand, mild weather and steady LNG arrivals

Dutch and British wholesale gas fell on Tuesday as low demand due to warmer-than-usual weather and ample supply due to the steady arrival of liquefied natural gas (LNG) tankers put pressure on prices.

The benchmark front-month Dutch contract dropped for the fifth consecutive trading day and was down 13.50 euros at 116.50 euros per megawatt hour (MWh) by 0858 GMT, the lowest level since mid-June.

The British day ahead contract fell by 23.00 pence to 35.00 pence per therm. “Weak demand and comfortable supply continue to exert strong downward pressure. New weather forecasts pointing to warmer temperatures provide additional downward pressure,” said analysts at Engie Energy Scan.

Forecasts on Refinitiv Eikon expect the rest of this week and next to be milder than normal, reducing demand for heating.

The steady arrival of ships carrying LNG to Europe has also eased concerns about shortage of supply as Russia has progressively cut gas flows. However, there are more than 35 LNG-laden vessels drifting off Spain and around the Mediterranean, and ports remain busy for unloading.

“The drop (of Russian supplies to Europe) has now nearly been completely absorbed by the market, which is a promising omen for Europe at the start of the winter,” analysts at Marex Research said. “We anticipate this LNG inflow to remain steady throughout winter,” they added.

The markets are also waiting for the EU commission’s proposal for a price cap on natural gas.

EU leaders are set to debate options later this week which include mandatory limits on the degree to which traded prices can fluctuate in a single day, according to a draft proposal.

The price cap can put more pressure on gas prices, according to analysts. In the UK, the gas system was 26.4 million cubic metres (mcm) over-supplied, according to National Grid data.

Peak wind generation was forecast to be around 8 gigawatts (GW) today and rise to 15.2 GW on Wednesday, out of total metered capacity of around 20 GW, Elexon data showed.

Stronger wind output typically reduces demand for gas from power plants. In the European carbon market, the benchmark contract was 0.41 euro lower at 67.10 euros a tonne.

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