European Gas Futures Hit Lowest Since July on Demand Moderation

By Geoffrey Smith — Benchmark natural gas prices in Europe fell to their lowest in two months on Monday as the ongoing drop in demand from industry encouraged hopes that the continent will be able to get through the winter without imports from Russia.

The front-month contract, which acts as a reference for all of northwest Europe, fell to as low as 171.30 euros a megawatt-hour before retracing a little to stand at 177.50 EUR/MWh by 05:45 ET (09:45 GMT), a drop of 5.7% from Friday’s close. 

Prices are now down by nearly 50% from their peak earlier in the summer, when Russia’s decision to stop all gas flows through the Nord Stream 1 pipeline triggered fears of widespread rationing across the continent. 

Russian imports typically account for 40% of the European total, but they are currently running at less than 10% of imports, reflecting European success in sourcing alternative gas over recent months, largely in the form of liquefied natural gas, or LNG. The decline in prices has accelerated as plans to impose consumption caps this winter have slowly taken shape. These are still to be finalized, however.

Mandatory demand caps would compound the ongoing demand destruction caused by the summer spike in prices, which has crippled much of the continent’s energy-intensive industry, especially its fertilizer and chemicals companies. 

German industrial demand, which was running only 3.6% below 2021 levels as late as April, was down 22% from 2021 levels in August, according to data from German gas market operator Trading Hub Europe.

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