European Gas Extends Slump With More LNG Heading to Region

(Bloomberg) -- European natural gas prices headed for a third day of sharp declines as more tankers are crossing the Atlantic with U.S. fuel to the energy-starved region. 

At least 15 vessels with liquefied natural gas declared Western European ports as their destinations as of Thursday, up from 10 on Wednesday, shipping data compiled by Bloomberg show. Plus, there are another 11 U.S. LNG cargoes with undeclared destinations whose paths suggest they are headed for Europe. 

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Benchmark Dutch front-month gas dropped below 100 euros a megawatt-hour for the first time in two weeks, falling as much as 26% to 98.58 euros after slumping 23% on Thursday. Prices, which hit fresh records earlier this week, are tumbling on hopes that increased LNG supply will ease the continent’s energy crunch. 

Supply concerns have grown more acute in recent days after flows from top gas provider Russia fell, coupled with halted nuclear reactors in France and low wind power output in Germany.  

Weather forecasts also turned milder for early January, pushing prices down. And there has been speculation that some traders opted to close positions before the holidays. 

Still, Europe remains caught in its worst energy crisis in decades with gas prices, which have surged more than fivefold this year, pushing power costs to records and fueling inflation. That is forcing industries to curb output and has triggered the collapse of suppliers.

Fuel shipments from Russia dropped this week with no flows from the country through a major route to Germany for a fourth straight day on Friday. Russian exporter Gazprom PJSC has fewer requests from buyers, which is why it is currently not using the Yamal-Europe link for German supplies, according to Russian President Vladimir Putin. 

That means Europe has to rely on its already depleted storage sites, which are less than 58% full, before buyers, who are probably waiting for prices to ease, top up purchases. Yet, industrial demand might be decreasing amid fresh waves of coronavirus restrictions. 

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Russia expects gas prices to remain “at high levels next year,” Deputy Prime Minister Alexander Novak said Friday, adding that the nation has always been in favor of long-term gas contracts. Gazprom has been meeting its contractual supply obligations to Europe, yet for months has not offered additional batches on the spot market for delivery in late 2021 or early next year. 

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