European gas crashes to €100 in mild weather and plentiful supplies

(Bloomberg) – Natural gas in Europe fell to €100 per megawatt-hour for the first time since June, as warm weather, large inventories and EU measures to contain the crisis ease fears of winter shortages.

Benchmark futures are down 12% and are around 70% below August highs. Warmer than usual temperatures are expected to remain across the continent through the end of the month, delaying the heating season and allowing storage sites to continue to fill. High levels of liquefied natural gas imports helped raise reserves to levels above their usual levels.

Also read: Europe prepares for a hot end of October in energy supply relief

Improving conditions are easing pressure on Europe’s struggling economy. Still, prices are more than three times higher than the five-year average for the time of year, and a cold winter spell could reignite supply problems.

“Europe is now in a comfortable position on supplies,” said Graham Freedman, an analyst at consultancy Wood Mackenzie. “The risks of breakdowns and rationing are now receding. But the real test will be when we are cold.

Dutch first-month gas futures, the European benchmark, were 11% lower at €101.51 per megawatt hour at 9:08 a.m. Amsterdam. They fell 20% last week.

European Union leaders agreed last week to back the urgent measures. They are in favor of a cap on the price of gas in electricity production and want to take measures to avoid extreme price spikes.

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The bloc’s energy ministers will meet this week to continue discussing details. Traders will await more details on the design of the EU plan, especially as a price cap had previously remained elusive due to fears it would encourage gas sellers to look elsewhere.

As the supply situation improves, Germany will be in a much better position next winter than this one, as more LNG enters the country, Handelsblatt reported, quoting the Minister of Economics Robert Habeck. Supplies from countries such as Norway and the Netherlands are expected to account for around a third of lost volumes from the closed Nord Stream 1 pipeline that carried shipments from Russia.

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