European gas prices seen falling further in 2024 on high storage - WoodMac
LONDON, March 14 (Reuters) - European gas prices are expected to fall as low as $6.70 per million British thermal units (mmBtu) in summer, down 15% from current levels, with inventories starting the season 55% full due to mild weather, Wood Mackenzie said on Thursday.
European gas prices have been steadily declining for the second winter running after rising sharply in the wake of Russia's invasion of Ukraine.
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In February, the benchmark contract TRNLTTFMc1 at the Dutch TTF gas hub fell to pre-war levels and is now trading near 25 euros per megawatt per hour (MWh) (around $8/mmBtu), compared to a record 306 euros/MWh in August 2022.
In a report, Wood Mackenzie said a second consecutive mild European winter means European storage levels will reach 89% by the end of July 2024, putting further pressure on prices.
Winter 2023/24 has seen higher temperatures and wind speeds than average, reducing heating demand and at the same time boosting wind generation, creating a double cut to gas consumption.
"With storage levels nearing full capacity towards the end of the summer, there will be up to 10 billion cubic meters of excess supply that will need to either be piped into underground storage facilities in Ukraine or floated in LNG vessels," Director of Europe Gas & LNG Markets Mauro Chavez said.
"This means that a higher summer-winter differential is required to balance the market, compared to what the current forward curve suggests, putting downward pressure on (third-quarter) prices," Chavez said.
The report said gas prices are set to rise in 2025 despite the expected increase in liquefied natural gas (LNG) supply coming online, as projects will take time to ramp up while some legacy LNG supply will continue to decline.
(Reporting by Marwa Rashad; Editing by Jan Harvey)