European Natural Gas Prices Plunge by 5% Amid Commodity Rout

European benchmark natural gas prices plunged by 5% on Monday amid strong pipeline supply from Norway a broad sell-off in all markets amid fears of a worsening U.S. economy.

The Dutch TTF Natural Gas Futures, the benchmark for Europe’s gas trading, was down by 5% to $38.16 (34.80 euros) per megawatt-hour (MWh) at 11:57 a.m. in Amsterdam.

Gas prices in Europe had surged by 13% last week amid concerns about supply from the Mediterranean with the escalating tension between Israel and Iran. Stronger demand for liquefied natural gas (LNG) in Asia is pulling more supply to the Asian continent, leaving lower volumes for Europe, where prices are at a discount to the spot Asian prices.

This week, however, started with a plunge in gas prices in both the European and UK wholesale benchmark prices. Stronger supply from Norway compared to previous weeks weighed down on the European prices.

But the sell-off in the equity and commodity markets today pulled down all commodity assets, especially crude and European gas. Fears of a recession in the United States with weaker-than-expected jobs data on Friday spilled over to European equity and commodity markets on Monday.

“Rising volatility forces investors to cut exposure across the board, hence the spillover to commodities from the current rout in equities,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, wrote on Monday.

A mild winter and full gas storage helped Europe through a second consecutive winter without most of the Russian pipeline gas it had previously received. The potential of lower LNG flows to Europe if Asian demand surges is one driver of a more bullish outlook on European prices, but fears of a recession and weaker commodity demand could change the outlook later this year.

Europe’s natural gas storage was 85.70% full as of August 3, according to the latest data from Gas Infrastructure Europe.

By Tsvetana Paraskova for Oilprice.com

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