European natural gas prices have fallen back to levels last recorded before Russia’s invasion of Ukraine in February.
armer weather than expected has helped continental countries to preserve their reserves.
Weaker demand from Europe is also a factor, as US exports of liquefied natural gas to Europe hit record levels this year, to make up for sharply lower pipelined natural gas supplies from Russia.
The Dutch TTF gas future for the coming month, the benchmark European contract, dropped as much as 7.4pc to €76.78 per megawatt hour on Wednesday – its lowest level in 10 months, according to data from Refinitiv.
That price was last logged just before Russia launched its attack on Ukraine.
However, the price later rebounded to trade 2.8pc down on the day, at €80.55, the Financial Times reported.
Moscow’s weaponisation of the commodities it sells Europe, combined with record-breaking temperatures, helped push gas prices to more than €300/MWh over the summer.
In an effort to stem rising prices, the EU has implemented a series of measures including mandatory gas storage and consumption reduction targets.
The latest fall comes after warmer than usual temperatures across north-west Europe, which are expected to linger into the new year.
As the warm weather reduces heating demand, Europe has been able to build up its gas inventory again after drawdowns from mid-November, including during the cold snaps in the early weeks of December.
Traders are confident that inventories will end winter at a very comfortable level with a very low risk of falling to critically low levels, said John Kemp, an energy market analyst at Reuters.
Consumption reduction targets have also helped to limit demand, with the EU aiming to cut its gas consumption by 15pc.
Earlier this week, 83pc of EU gas storage was filled, data from industry body Gas Infrastructure Europe shows, still above the target of 80pc set for the start of November.
UK gas prices have also dropped back from their highs earlier this year. The day-ahead gas price closed at 155p per therm yesterday, compared with 200p/therm at the start of 2022, and over 500p/therm in August.
Meanwhile, oil prices have dropped, as investors grow more nervous about China’s decision to drop some Covid restrictions.
Brent crude has lost 1.5pc to $81.93 per barrel, while US crude was down 1.9pc at 77.48 per barrel.
Surging Covid-19 cases in China have dimmed hopes of a recovery in fuel demand for the world’s largest crude oil importer.
The news that the US is now requiring negative Covid-19 tests for air passengers travelling from China, while Italy is imposing mandatory testing, has hit the oil price, and stocks.
Oil markets have also been buffeted by rising expectations of another interest rate hike in the US, as the Federal Reserve tries to limit price rises in a tight labour market.
Trading volumes over this week are expected to be weak.
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