Temperature rebound drives up European natural gas prices, but significant downward risks still in the long term

The European natural gas futures prices rose from a 23-month low, with an intraday increase of 2.2%. Prior to this, due to stable supply, mild weather, and strong renewable energy generation, European natural gas prices had fallen for seven consecutive weeks, falling below €30/MWh for the first time since June 2021. Meteorological agency Maxar Technologies stated that most parts of Germany will have clearer and warmer weather this weekend, while temperatures in Spain will be below average. Energy Aspects analysts stated that long-term driving factors point downward, aside from price spikes caused by weather. Although Europe’s imports of liquefied natural gas are strong, industrial demand is limited, and prices may continue to decline in the coming weeks. After a mild winter, Europe still has relatively high natural gas storage before the start of the storage season, which could help suppress prices. Recent inventory injections indicate that they are filling inventories as planned before early summer, posing significant downside risks to end-of-Q3 pricing levels.