Two factors behind the drop in gas prices in Europe

Wholesale gas prices fell in the Netherlands on Tuesday as well in Great Britain, impacted by lower demand due to warmer than usual weather and abundant supply between stable shipments of liquefied natural gas.

The Dutch gas contract for the month to the closest expiration for the fifth consecutive trading day fell 13.5 euros to 116.5 euros per megawatt hour at 08:58 GMT, the lowest level since mid-June.

The UK contract the day before delivery also dropped 23 pence to 35 pence per caloric unit.

“Weak demand and a comfortable oversupply continue to exert strong downward pressure and new weather forecasts of warmer temperatures are exerting further downward pressure,” analysts at Engie Energy Scan said.

Refinitiv Icon has predicted that the weather for the remainder of this week and next week will be milder than usual, reducing the demand for heating.

The steady arrival of ships carrying LNG in Europe has also alleviated concerns over supply shortages despite Russia’s gradual reduction in gas flows.

However, more than 35 ships loaded with LNG are idle off Spain and across the Mediterranean, and ports are still busy unloading.

Markets are also in pending the European Commission’s proposal to limit the price of natural gas and this week EU leaders are expected to discuss options that include mandatory restrictions, according to the draft proposal.

According to analysts, setting price caps could put further pressure on gas prices.

In the UK, the gas system recorded a supply surplus of 26.4 million cubic meters, according to data from the national network.

In the European carbon market, the main contract fell by € 0.41 to € 67.10 per tonne.

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