Natural gas prices in Europe are likely to plummet further on lackluster demand from power generation and industry.
This downward trend has led traders and industry officials to consider the possibility of day-ahead prices dipping below zero in some European markets during the summer, according to a report by Oilprice.
According to the report, several factors have contributed to this situation, including abundant inventories after a mild winter, consistent imports of liquefied natural gas (LNG), and weak demand. As a result, European benchmark natural gas prices have experienced eight consecutive weeks of losses, marking the longest losing streak in over six years.
While it is unlikely that the benchmark price will fall below zero, certain regional day-ahead prices in Europe may briefly turn negative if demand remains weak and renewable power generation remains strong.
The report quoted Peder Bjorland, the vice president for gas trading and optimization at Norway’s Equinor, saying, “individual regional gas markets in Europe could go negative when you have hours and days with renewable production is current trend sharply contrasts with last year when benchmark prices skyrocketed to as high as $322 per MWh in August.
The surge was a result of Russia reducing its pipeline supply, which caused concerns of potential gas shortages in the winter among governments and industry.
Thanks to milder winter weather, reduced consumption at the EU level, and demand destruction in the industry due to high energy costs, Europe managed to get through the 2022/2023 winter without experiencing gas shortages or rationing.
Presently, natural gas inventories in Europe are comfortably high for this time of the year.
As of May 24, gas storage sites in the EU were 66.71% full, marking the highest level in at least a decade for this period, according to Gas Infrastructure Europe, the report said.