Natural gas prices in Europe, US edge up amid supply issues and rising demand

US gas futures gained 1 percent on June 6.

Natural gas prices in Europe and the US have risen recently after declining for several months on muted demand.

US gas futures gained 1 percent on June 6 while European gas futures jumped in the week starting June 5.

The uptick in prices has been fueled by supply issues in Europe and steady demand growth the US caused by hotter temperatures, analysts said.

“Some LNG (liquefied natural gas) terminals in Europe have been shut down and gas pipeline in Turkey also closed which has led to supply-side issues; and therefore the price rise,” said Suman Chowdhury, Chief Economist and Head of Research, Acuite Ratings & Research.

Prices increased in the US because of a slight increase in LNG demand.
“LNG shipments from US go to some countries in Asia including India. Demand is energising in some countries in Asia. In India, power demand is on the higher side because of the summer season, which impacts the LNG demand as well,” Chowdhury added.

More broadly, international LNG prices have eased in 2023 amid milder-than-expected winters in Europe and muted energy demand because of inflation and recession fears.

European natural gas benchmark Dutch TTF was trading around 77 euros in January 2023 after touching an all-time high of 350 Euros per megawatt hour (MWh) in August 2022.

Analysts said that despite the slight increase in prices recently, natural gas prices are expected to remain muted in the medium term.

“Even with the slight increase, natural gas prices continue to remain lower than the last year’s prices. The recent in prices is seasonal and mostly witnessed during June-July, the summer season,” said Hitesh Jain, Lead Analyst, Yes Securities. “Prices are expected to remain muted due to decline in demand.”

Impact on India

India is quite vulnerable to LNG prices as the country is dependent on imports for 50 percent of its natural gas requirements.

The decline in prices in 2023 have proven to be a relief for India gas players including gas importers such as GAIL (India) and city gas distribution companies such as Indraprastha Gas Limited and Mahanagar Gas Limited (MGL).

Indian gas companies expect to benefit from lower natural gas prices; their performance was impacted in FY23 from record-high prices.

In 2022-23, India’s natural gas consumption declined by around 6 percent on account of high international gas prices.

Imports of LNG also fell in the year to 26,647 mmscd (million metric standard cubic metre) from 31,028 mmscd.​