Negative pricing seen spreading from oil to gas as European demand slumps
A month after U.S. crude oil prices collapsed into negative territory, European gas markets are facing the prospect of also slipping into the red after a slump in demand and surging inventories pushed prices into low single digits. Dutch and British gas prices have plunged due to weak demand amid coronavirus lockdowns and strong renewables output, compounding an already oversupplied market with little available storage space left.
Some traders are expecting European gas contracts for near-term delivery to go to zero or even turn negative - which could force sellers to give gas away - following a similar move in the West Texas Intermediate (WTI) oil price last month.
“If supply remains this strong until storage is full, we can possibly see negative prices at some point, as there is no sign of relief from the demand side,” a European gas trader said.
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