European natural gas posted one of the biggest monthly drops this year as depressed industrial activity and strong inventories offset concerns about a spike in summer cooling demand.
Benchmark contracts declined 24% in July. Prices have plummeted about 63% this year, even after surging in June as heat blanketed parts of Europe and unexpected outages in Norway sparked worries about drawing down supplies before winter.
The monthly slide reflects an easing of the continent’s gas strains. Large industrial consumers still appear reluctant to run their businesses at full steam after last year’s record surge in energy costs prompted them to curb production. The sustained demand shortfall has allowed the region to bolster storage levels, which are now well above the seasonal average at 85%.
Still, Europe’s gas market remains fragile. Supply disruptions, a cold winter or increased competition for liquefied natural gas from Asia may push prices higher. BloombergNEF forecasts that a considerable drop in gas supply is set to delay European storage from reaching 100% full by almost two months.
A longer-than-expected maintenance schedule at facilities in top exporter Norway also may disrupt markets. Flows are bouncing back to spring levels after unplanned outages caused some supply strains since May.
Dutch futures for September delivery, the most active contract now, settled up 5.5% to €28.37 a megawatt-hour. French power increased 5% to €73 a megawatt-hour following news that three planned reactor outages will be extended.
--With assistance from Anna Shiryaevskaya and Ellie Harmsworth.
