Europe slows down gas purchases in anticipation of lower prices

Purchases of natural gas needed to fill European storage facilities are slower than usual at this time of year, despite the recent drop in prices, with some buyers betting on further falls.

Bloomberg reports.

The belief that prices will continue to fall is causing many buyers to wait to replenish stocks ahead of next winter.

Benchmark futures on the continent have fallen to only a fraction of the record levels seen last summer, but this was not enough to stimulate purchases at a time when consumption is slowly recovering from crisis lows.

The decline in fuel use means that global supplies are now sufficient to cover European demand, even with reduced Russian flows. But gas producers and traders warn that the crisis is not over, and a belated and uncertain recovery in consumption could upset the fragile market equilibrium.

There are expectations that prices could fall to as low as €10 per megawatt-hour, more than 70% below current levels, but even if this happens, the low prices are unlikely to last.

Experts have no doubt that Europe will rebuild its gas reserves to meet the European Union's targets. The reserves are already above normal, and there should be no problems during the next winter.

Author - Olena Madiak, 08/05/2023