Europe has more natural gas than it knows what to do with. So much, in fact, that spot prices briefly went negative earlier this week.
For months, officials have warned of an energy crisis this winter as Russia — once the region’s biggest supplier of natural gas — slashed supplies in retaliation for sanctions Europe imposed over its invasion of Ukraine.
Now, EU gas storage facilities are close to full, tankers carrying liquefied natural gas (LNG) are lining up at ports, unable to unload their cargoes, and prices are tumbling.
The price of benchmark European natural gas futures has dropped 20% since last Thursday, and by more than 70% since hitting a record high in late August.
On Monday, Dutch gas spot prices for delivery within an hour—which reflect real time European market conditions — dipped below €0, according to data from the Intercontinental Exchange.
Prices turned negative because of an “oversupplied grid,” Tomas Marzec-Manser, head of gas analytics at the Independent Commodity Intelligence Services (ICIS), told CNN Business.
It is a hugely surprising turn of events for Europe, where households and businesses have been clobbered by eye-watering rises in the price of one of its most important energy sources over the past year.
Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, says unseasonably mild weather is largely responsible for the dramatic change in fortune.
“In countries like Italy, Spain, France, we’re seeing temperatures and [gas] consumption closer to August and early September [levels],” he told CNN Business. “Even in countries in the Nordics, the UK and Germany, consumption is way below the average for this time of the year,” he added.
The European Union has also built substantial buffers against any further supply cuts by filling gas storage facilities close to capacity. Stores are now almost 94% full, according to data from Gas Infrastructure Europe. That’s well above the 80% target the bloc set countries to reach by November.
Source:CNN