Natural gas prices fell sharply in the United States and Europe on Monday as warm weather, improving stockpiles, and proposed action by the EU dragged on the commodity’s fundamental drivers. Get your market update from FxWestwater here:
Natural gas prices in Europe and the United States dropped sharply on Monday, helping to ease concerns for the commodity heading into the winter months. A backdrop composed of warmer-than-usual weather and ahead-of-schedule inventory buildups in the US and the EU has helped to cool speculative pressure on the commodity at a critical time.
According to a draft proposal reported by Reuters, the European Union appears ready to move forward with a “dynamic” price cap for LNG. The Agency for Cooperation of Energy Regulators would be tasked with implementing the price cap. The ACER’s mandate would target prices at the Dutch Title Transfer Facility —the virtual pricing point for EU natural gas. The exact effectiveness of a price cap remains debated, but for now, the market appears to see it as a bearish price development.
Still, EU governments would need to reach a consensual agreement on the move, which Germany may oppose. Meanwhile, the bloc has made better-than-expected progress on its inventory buildup, with AGSI-GIE data showing that EU storage levels rose above the 92% mark as of October 15. So far, October has been a mild month in terms of temperatures across most of Europe—a welcome development for the energy situation.
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