Europe gas drops as nations ramp up measures to ease crisis

Despite easing in recent weeks, gas prices are still more than seven times above the average for this time of year. PHOTO: AFP

FRANKFURT - European natural gas futures fell to their lowest level in almost two months as nations intensify their fight to beat the energy crisis with the start of the heating season less than two weeks away.

Benchmark prices dropped as much as 8.3 per cent on Monday, extending last week's decline. Germany, Britain and others plan to spend many billions to ease their reliance on Russian imports, rescue local energy companies, and cap prices to alleviate the burden for businesses and households.

Discussions on the European Commission's proposals to help reduce the impact of the crunch continue and need to be signed off by member states. The plans include raising €140 billion (S$197 billion) from energy companies' earnings, as well as mandatory curbs on peak power demand and increasing liquidity.

Germany's decision on Friday to seize control of Russian oil major Rosneft's German oil refinery assets is seen as just the first step in an overhaul that could see Berlin pressured to take over a big chunk of the energy sector in Europe's largest economy.

The government is also in talks to nationalise Germany's biggest gas importers, including Uniper and VNG, according to people familiar with the discussions.

The British government is developing a plan that may halve energy rates for many businesses, as part of a £40 billion (S$64 billion) support package being finalised by Prime Minister Liz Truss.

France plans to cap energy price hikes for households at 15 per cent starting next year, a move that will cost the government a net €16 billion in 2023, according to Finance Minister Bruno Le Maire.

As the heating season approaches, the effectiveness of these measures will be tested and traders will keep focusing on storage levels. European inventories are about 86 per cent full, slightly above the five-year average, with 90 per cent in Germany, according to Gas Infrastructure Europe.

Despite easing in recent weeks, gas prices are still more than seven times above the average for this time of year, accelerating inflation and putting economies on the brink of recession. Demand is expected to gradually creep up ahead of the Oct 1 start of the heating season. BLOOMBERG

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