European gas prices were down on Monday, hitting their lowest price since June, with Europe reporting almost full supplies to cope with winter, when oil was suffering from recession fears.
At around 10:30 GMT (12:30 in Paris), the Dutch TTF futures contract, the benchmark for natural gas in Europe, was trading at 98.60 euros per megawatt hour (MWh), falling back below 100 euros per MWh, the first time this has happened since June.
“Prices have come down considerably from what we saw in August and September, thanks to mild autumn weather across Europe and high storage levels ahead of the onset of winter,” comment analysts at Energi Danmark.
PVM Energy estimates that the European Union’s natural gas reserves are 92% full.
By the end of August, the TTF had climbed to 342.005 euros per MWh, less than 3 euros from its all-time high reached in March a few days after the start of the Russian invasion of Ukraine.
However, natural gas prices in Europe are still high, up 40% since the beginning of the year.
For Stephen Brennock, of PVM Energy, “the abundance of supply (…) and the fall in gas prices have reduced the prospects for gas substitution for oil”, especially for heating, for the next few months, thus easing the pressure on crude prices.
A barrel of North Sea Brent crude for December delivery lost 0.71 percent to $92.84, and its U.S. counterpart, a barrel of U.S. West Texas Intermediate (WTI) for delivery in the same month, fell 1.02 percent to $84.18.
Even if the two raw materials are only marginally substitutable, gas prices, which have recently risen to stratospheric levels, have prompted a search for substitutes such as diesel, which is proving to be a good alternative for heating and electricity generation.
Discouraging gas prices had thus increased the demand for crude oil.
In addition, “the rising dollar and global demand uncertainty continue to put pressure on commodity prices,” added Walid Koudmani, analyst at XTB.
As crude oil is traded in dollars, a sharp appreciation of the greenback weighs on black gold, as it weakens the purchasing power of investors using other currencies.
