Economy Watch: Netherland's Influence on European Natural Gas Prices
Natural gas prices in Europe continue to climb, as the continent's largest producer, the Netherlands, announced a further reduction in their production cap for the first half of 2015. Sources from Groningen announced that the production from the gas field, the largest in Europe, would fall below a level announced at the end of last year.
This is the opposite of America, where supply is up and prices down because of innovation and creativity by the private sector via oil shale and fracking.
The reduced production reflected right away as the cost per therm hit a six week high in the European market. The Dutch Transfer Facility hubs and the UK's Balancing Point managed to extend gains earlier this week.
The Groningen Impact
Groningen has been the largest producer of natural gas in Europe and has been the backbone of the Netherlands fossil fuel economy. But due to environmental and safety hazards the field was forced to cut back on production to prevent a negative ecological impact; this in turn is expected to severely affect the economy and will force it to import gas by 2025. This could benefit countries like Saudi Arabia perhaps even America.
Though experts predict that this is only a short-term rise, they believe that long-term prices will rise due to a persistent supply-demand mismatch. On Monday, the prices stood at $7.92 per million BTU for natural gas and $26 per megawatt-hour for Dutch fuel, both the highest since December of last year.
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