Gas Prices Trend Lower As Demand Remains Weak

Natural gas prices continued to move lower on Wednesday after peaking last week. Europe fell 0.6% to EUR 24.63 to be down 1% this month. Demand remains weak with January euro area IP falling 3.2% m/m to be down 6.7% y/y, weaker than expected. Ukraine’s attack on energy sites in seven Russian regions has not provided support for gas prices.

• Refilling of storage for next winter is likely to occur in the summer with summer-dated contracts at a discount to winter ones and the requirement for storage to be at 90% capacity by November 1 remains. The current heating season finishes at the end of March and European storage is above seasonal averages at around 60% filled.
• Bloomberg is forecasting Russian LNG output to rise 13% y/y in the summer, as Arctic LNG 2 comes on line and utilisation rates rise, but its export capability will be limited by sanctions.
• US natural gas prices fell almost 3% on Wednesday to be down 10.5% in March to date. They reached a high of around $2 on March 5 but are now at $1.66.
• North Asian prices were little changed yesterday to be up almost 3% this month.