May 24, (THEWILL) – Energy experts say cooler temperatures this week and a dip in available wind power this month are boosting the demand outlook for June for U.S. natural gas, leading to nearly 3% price gains on Wednesday.
Oilprice.com reports that at 9:45 a.m. EST on Wednesday, U.S. natural gas futures were trading up 2.93% at $2,389 per million British thermal units (Btu).
While the weather is a big driver of prices on Wednesday, natural gas is also gaining on a downturn in renewable energy from wind farms, which has increased usage of natural gas over the past few weeks.
Counterbalancing a further uptick in natural gas prices is record production in the U.S., combined with a resumption of a similar level of Canadian gas exports to the U.S., which had declined due to wildfires raging in Alberta that led to some production shut-in.
Quoting Reuters’ information from the federal energy data, the report said wind power generation this week accounted for only 7% of total U.S. power generation, down from 17% in mid-April.
On Tuesday, natural gas futures had hit a one-week low, largely due to an anticipated increase in U.S. output combined with the return of full volumes of Canadian exports on the U.S. market.
On the other hand, benchmark natural gas prices in Europe continued to fall on Wednesday, extending several weeks of losses amid weak demand in the spring and higher-than-normal inventories after the end of the winter.
Oilprice.com reports that the front-month futures at the TTF hub, the benchmark for Europe’s gas trading, fell by 1.5% to $30.84 (28.68 euros) per megawatt-hour (MWh) as of 10.33 a.m. GMT on Wednesday.
That’s the lowest price since November 2021, when the energy crisis in Europe started ahead of the 2021/2022 winter season, with the crisis reaching a peak later in 2022 after the Russian invasion of Ukraine and the lack of most of Russia’s pipeline gas supply sent prices soaring.
Currently, demand for natural gas in Europe is weak after the winter heating season ended and summer demand is yet to begin. Gas consumption from industry, which went through a very rough patch last autumn and winter, is also weak.
Inventories, on the other hand, are comfortably high for this time of the year. As of May 22, natural gas storage sites in the EU were 66.22% full, according to data from Gas Infrastructure Europe. The level of gas in storage is the highest for this time of the year in at least a decade.
High inventories ahead of the summer and weak demand suggest that the worst of the energy crisis in Europe could be behind us.
Yet, analysts and officials warn that the EU shouldn’t be complacent ahead of the next winter season.
Despite the slump in Europe’s gas prices this year, the continent is “not out of the woods” yet as three factors could worsen the European energy crisis later this year, Fatih Birol, the executive director of the International Energy Agency (IEA), told CNBC last weekend.
Expected higher LNG demand in China after the reopening, the possibility of a U.S. default, and the remaining dependence on Russian gas are three reasons why Europe shouldn’t be complacent ahead of the 2023/2034 winter, the IEA’s top executive warned.