Natural gas prices tumble as demand drops
08:36, 24 December 2021
Natural gas futures have continued to tumble as persistent milder weather reduces the demand of household heating.
Futures lost more than 6% on the morning of Christmas Eve, dropping to $3.63 (£2.71) per million British thermal units (MMBtu).
Warmer weather
John Abeln, an analyst with data provider Refinitiv, told Reuters: “I think the weather and the demand forecast are the big factors weighing on the market. The end of December was already expected to be significantly warmer than usual, but forecasts keep shifting warmer.”
He added that the festive period was also putting the brakes on demand. He added: “We typically see lower commercial and industrial gas usage around a major holiday like Christmas, but with the warm weather we will also see lower residential loads.”
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Gas oversupply
Prices are also going down because of an oversupply of natural gas. Yesterday, European natural gas prices dropped by more than 20% as at least 10 vessels were identified by Bloomberg ship-tracking data to be heading across the Atlantic.
However, the vessels’ final destinations have not yet been verified, but it is believed that the cargo could offset a low supply of gas from Russia. Gas prices surged sixfold this year as tensions between Europe and Russia – a key gas supplier – escalated and pandemic restrictions lifted, boosting demand.
It’s thought that Russia is reducing its gas supply to Europe to advance its Nord Stream 2 project and to pressure countries to sign long term gas deals at fixed prices with state-owned Gazprom.
Gas prices could, however, rise again in January as there are predictions that Europe could experience much colder weather at the start of 2022.
Read more: Oil and gas prices expected to remain strong in 2022
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