Natural gas prices in Europe declined further on Friday, March 3, amid signs that a slow economic recovery in the region will weigh on demand, according to Bloomberg.
Benchmark gas futures decreased as much as 3.3% on Friday to the lowest level since August 2021, and were heading for a weekly loss of more than 10%. Persistent high inflation pressures are forcing central banks to consider more interest-rate hikes, which risks braking economic activity and energy consumption.
“Economic slowdowns in advanced economies weigh on commodities demand,” Caroline Bain, Chief Commodities Economist at Capital Economics, said in a note.
Fitch Ratings sees Germany and Italy’s economies going into recession by the end of this year as they battle to control inflation. Manufacturing output fell sharply in January in France, “confirming that industry is currently in a strong slowdown phase, which is likely to continue over the coming months,” said ING Economics in a note.
Strong liquefied natural gas imports are also pushing the fuel’s cost lower. LNG flows to Europe have surged in recent days, helping the continent offset concerns over the current late-winter cold snap, which is expected to continue next week, and even intensify in parts of the region.
Storage is also at healthy levels, with sites about 61% full, well above the five year norm of 39% for this time of year, according to Gas Infrastructure Europe.
“Strong fundamentals seem to be mitigating most bullish drivers,” said Alfa Energy in a note on Friday.
Benchmark gas futures traded 2.8% lower at €45.49 per megawatt-hour by 11:09 a.m. in Amsterdam. The UK equivalent contract dropped 2.9%. German next-month power contracts also declined.