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Gas prices in Europe have fallen for the sixth day in a row, the worst losing streak in over a year, as containers of the liquefied fuel arrive on the continent just as industrial shutdowns and warm weather reduce demand. On Wednesday, futures plummeted as much as 9.7% as a flotilla of US LNG cargoes arrived in the region, while many boats destined for Asia were rerouted to Europe. More supplies arrive after record costs drove firms to suspend or restrict production earlier this month, stifling demand at a time when the continent is experiencing exceptionally high temperatures. Gas prices in Europe have risen by more than 400% this year, after Russia cut off supplies just as demand was picking up. Even though prices have dropped in the last week, they are still more than five times higher than the five-year average.
The LNG reprieve could be short-sighted, as traders remain on edge due to geopolitical concerns and Russian pressure to have its controversial Nord Stream 2 pipeline to Germany approved. “Europe’s gas problem may not go away next year,” said Andrew Hill, head of European gas analysis at BloombergNEF, in a report on Wednesday. “Geopolitical issues and acrimony with Russia, particularly around the Nord Stream 2 pipeline, will increase the scope for Russia to limit flows to Europe in the first half of the year, and potentially much longer.”
Benchmark By 9:51 a.m. in Amsterdam, European gas prices had fallen to 96.22 euros per megawatt-hour, before rising to 97.50 euros. Prices in the United Kingdom fell as much as 12% to 235 pence per therm, the lowest since December 7.
LNG is already being delivered to European power systems. Flows from the Isle of Grain and Milford Haven Terminals in the United Kingdom have increased by more than 20% since December 24, according to National Grid data (LON:NG). Flows at other European ports are expected to increase as well, with the amount of U.S. cargoes bound for Europe’s ports increasing by one-third over the weekend. The region is also garnering greater supplies as Asia’s largest purchasers choose to utilize their inventories rather than procure new cargoes this winter.