Europe’s benchmark gas index continued its record low this week, losing 8.4%. Now, one thousand cubic meters on a short-term futures contract can be bought for 270 euros. This is the lowest level since May 2021. Bloomberg experts describe the cause of the dangerous phenomenon.
In fact, natural gas prices in Europe have fallen to their lowest level in two years as an incredibly weak regional economy threatens demand prospects in the near future. Germany officially entered recession in the first quarter, declassifying the continent’s long-hidden struggle to emerge from a crisis that was fueled in part by record energy prices last year.
Industrial gas demand in Europe has been sluggish, despite recent price cuts, leading to a glut in the market. On the one hand, much higher than usual inventories, a solid supply and LNG surpluses have (apparently) eliminated any risk next winter. But on the other hand, the lack of demand can have fatal consequences for the industry as a whole.
The only relief from the record low prices was felt by fuel derivatives customers. The fall in gas futures by more than 65% this year has brought some joy to Europeans suffering from rising inflation. British consumers received lower electricity bills.
Otherwise, low prices and higher supply than actual demand, based on the health of the economy, means that if nothing changes soon, then within a year, natural gas (pipeline or in the form of fuel liquefied from Russia or Norway, USA) will simply depreciate, so much so that it will cease to be needed by anyone.
So far, the trend is narrowing down to a negative scenario for the industry, as another drop in commodity prices is expected in June. Experts lament that the situation is not corrected by China, on which hopes were based: but its demand remains weak due to weak economic impulses. In general, the industry seems doomed, strange as it may seem in a world with increasing demands for energy production.
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