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Why are gas prices in Europe declining?

Over the past few months, benchmark gas prices in Europe have been progressively falling toward their pre-Ukraine war levels.
Due to Russia cutting gas flows soon after the West-imposed strict sanctions in reaction to its assault on Ukraine in late February, Europe has been experiencing a shortage of energy this year.
Dutch front-month gas, the European benchmark, has dropped 67% since reaching an all-time high in August to approximately 100 euros each megawatt hour and is at the bottom point since mid-June despite decreasing Russian gas pipeline supplies.
Price increases from this time last year are 12.6%.
Despite the fact that the winter gas season started in early October when demand for heating generally increases, Europe has had warmer weather than normal for the time of year, which now has helped to reduce demand.

In addition, the entire European Union exceeded its goal of filling gas storage facilities to 80% capacity by November 1st. According to data from Gas Infrastructure Europe, storage areas are currently 93% filled compared to 77% at the same time last year.
Both the Norwegian pipeline supply and the supply of liquefied natural gas (LNG) have proven robust. By the end of last week, 2.81 million tonnes of LNG had been imported into Europe, as per Nikoline Bromander, a well-sought analyst at the Rystad Energy consulting firm.
Additionally, there has been a significant increase in wind energy production, which lowers the requirement for gas by power plants. Another factor is the EU’s decision to work together to cut costs and consumption.
Analysts claim that the European Union’s debates regarding a price ceiling for the entire EU and limiting intraday price swings have put pressure on prices. These discussions are intended to reduce the cost of fuel.
The effects of the weather and demand are important factors.
For the next two weeks, forecasts indicate that Europe will remain to see milder weather. The frequency of draws from storage will decrease as a result.
Long-range predictions suggest that this winter will be milder than average throughout much of Europe. Bromander said the variation between a chilly and a milder winter is roughly 25 billion cubic metres (bcm), or 7-8% of the entire EU gas demand.
Analysts, though, have cautioned against becoming smug.
According to Bromander, the impulse in Europe will be to appreciate the difficult work and difficult decisions on supply and demand that have been made while also heaving a sigh of relief.
Prices may be impacted by elements like increased demand for LNG from Asia if the continent endures a harsh winter and any disruptions to LNG outages or new significant outages at gas infrastructure.
The inability to acquire slots for unloading has caused several LNG cargo ships to circle off the coast of Spain, revealing Europe’s lack of refuelling capacity.
Are people safe from harm now? Without a doubt. Tom Marzec-Manser, the head of gas analytics and intelligence at ICIS, continued, saying while it’s mild now, a protracted cold spell might still contribute to skyrocketing prices at the end of winter, or even next winter.
Decreased wholesale costs do not always equate to lower customer retail costs.

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Energy providers often hedge, or purchase, the energy they will need for clients six months in advance. As a result, changes in the wholesale markets take longer to reflect in consumers’ bills.
Numerous companies that use gas as a feedstock, including those that produce fertilisers, ceramics, glass, and cement, have decreased production this year in response to the high cost of energy.
Analysts at ING Research claimed the concern with the offer in the European energy market is the possibility for demand to start to rise up. If this happens, it will be harder for Europe to rebuild storage levels next year in time for the winter of 2023–2024.

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