European natural gas prices fall to lowest level since 2021 amid rising stockpiles

Rising LNG imports from the US and Gulf have helped the region to replace Russian imports

A ship carrying liquefied natural gas arrives at the Isle of Grain terminal in Kent, the UK. PA

European natural gas prices have fallen to their lowest since May 2021 amid rising stockpiles and lower demand.

Dutch Title Transfer Facility gas futures, the benchmark European contract, was last trading at €24.10 ($25.94) per megawatt hour on Thursday.

“Global gas demand could fall to the lower end of expectations as a return in industrial demand in the EU remains elusive,” said Masanori Odaka, a senior analyst at Rystad Energy.

“Still, we expect the latter half of 2023 to be supported by weather-driven demand in Europe and Asia,” Mr Odaka said.

Rising imports of liquefied natural gas from the US and Gulf countries have helped the continent to replace Russian supplies.

Europe's gas reserves are about 67 per cent full, which is significantly higher than the five-year average of about 50 per cent, according to Gas Infrastructure Europe.

Gas inventories in Germany, the EU’s largest economy, currently stand at 73 per cent.

Europe made it through the winter without an energy crisis as it faced less competition for LNG cargo from Asia, where economic growth was dampened by strict Covid-19 measures and travel restrictions.

The spread between European and Asian natural gas prices has “widened” recently, Rystad said.

“Overall, the risk of strong demand this summer will keep putting pressure on the global LNG market.”

Some traders are worried about prices dropping due to limited downstream demand, but a hotter-than-normal summer could boost gas use for cooling, particularly in Asia, the Norway-based consultancy said.

Global LNG trade hit a high of $450 billion in 2022 as Europe scrambled to secure supplies to replace Russian gas, according to the International Energy Agency.

Despite a rise in demand, LNG supply grew by only 5.5 per cent last year, mostly due to maintenance at large export terminals and as Freeport LNG’s Texas-based plant – one of the world’s largest export centres of the supercooled fuel – was shut down after a fire in June 2022.

Qatar, the world’s largest exporter of the superchilled fuel, is “on track” to raise its LNG production capacity to 126 million tonnes per annum by 2027 amid surging global demand, according to its Energy Minister, Saad Al Kaabi, said.

The Gulf country, which signed a 27-year LNG deal with China in November, is “busy” negotiating with potential buyers, Mr Al Kaabi said during an event earlier this month.

He also said the worst was yet to come for Europe, as an unusually warm winter had resulted in lower electricity demand.