(Bloomberg) -- European natural gas prices plunged to the lowest level in six weeks as stronger renewable generation and weak fuel consumption helped calm the market ahead of the heating season.
Benchmark futures closed 5.5% lower on Tuesday, erasing three sessions of consecutive gains. Prices settled at the lowest since July 30 — before Ukraine’s incursion into Russia’s Kursk region, near a key gas point, roiled markets and sent futures to a 2024 high.
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While recent volatility has reflected concerns about remaining flows from Russia and unplanned outages among major producers, some traders said Tuesday’s selloff was led by algorithm-based funds, signaling August’s rally had potentially gone too far.
As other risks evaporate, the region’s brimming underground gas storage facilities — which are almost 93% full — have become a more important factor in keeping a lid on prices. Stronger wind power output and subdued gas consumption are also helping to maintain the market’s balance ahead of winter.
Europe has come a long way to reinforce its energy security since the 2022 crisis, relying on a number of global suppliers for a steady flow of gas.
The region could still face bouts of volatility as it heads into the cold season, with increased competition from other buyers making it harder to source cargoes. Top supplier Norway hasn’t completed its lengthy maintenance season yet, and Tropical Storm Francine could affect producers in the US.
While the storm is currently expected to skirt key liquefied natural gas facilities, power flows to the Freeport plant in Texas dropped earlier Tuesday. The reason wasn’t immediately clear.
Read Also: Storm Francine Is Set to Strengthen as It Plows Toward Louisiana
Dutch front-month futures, Europe’s gas benchmark, settled at €35.28 a megawatt-hour. The UK equivalent contracts also closed at a six-week low.
--With assistance from Anna Shiryaevskaya and Elena Mazneva.
©2024 Bloomberg L.P.
