European natural gas fell after a two-day rally as unusually warm weather reduced demand and eased concerns over winter shortages.
Futures contracts for December delivery fell by 6.5% as higher than normal temperatures delayed the need for heating and allowed gas injections to continue at already fuller-than-usual storage sites. Strong flows of liquefied natural gas and lower industry consumption are also causing a sudden glut in Europe, according to Bloomberg.
Mild weather could continue across much of Europe until mid-November, according to meteorologist Maxar. While full reserves will provide a cushion when temperatures inevitably drop, refueling will be even more difficult in the winter of next year in the absence of regular supplies from Russia, which has reduced pipeline shipments to the continent.
The Dutch gas contract for December, the European standard, fell 5.5% to € 131.70 per megawatt hour by 8:42 am in Amsterdam.
Prices are still nearly five times higher than the five-year average for this time of year even after falling sharply from their August highs.
Policy makers are looking to take more steps to ensure the economy is protected from any further price hikes, and the European Commission intends to propose a cap on gas prices using a dynamic pricing mechanism, which could come into effect as early as this. ‘winter, in an effort to reduce volatile fuel costs.
