(Bloomberg) -- European natural gas prices slumped to a two-month low as persistent low demand for the fuel helps to preserve the region’s inventories.

Benchmark futures settled 7.8% lower on Monday, snapping a two-day gain for the contract. Prices briefly plunged below €40 a megawatt-hour for the second time since last week, before ending the day back above the mark.

The market is regaining confidence that Europe will end the winter with plentiful gas supplies as prices have stayed within a narrow range despite freezing weather. Overall, demand is proving to be stubbornly subdued amid a grim macroeconomic picture, indicating that prospects for a substantial increase in industrial consumption remain unlikely in the near future. 

Although industrial demand for gas has rebounded 9% from November last year, when record high prices forced industries to reduce winter consumption, it’s still 22% below the five-year average for the month, Tom Marzec-Manser, an analyst at ICIS, said in a post on social media platform X.

“The strong increase in wind generation and the upward revision of temperatures” pushed prices down on Monday, analysts at Engie SA’s EnergyScan wrote in a note.

The weather is set to get milder from London to Berlin toward the end of the week, according to forecaster Maxar Technologies Inc. That’s leaving the continent in a comfortable position for its second winter since Russia curbed pipeline flows. Withdrawals from storage sites were marginal compared with previous years at the start of the heating season, although the use of inventories has now accelerated amid the cold snap. 

Dutch front-month futures, Europe’s gas benchmark, settled at €40.10 a megawatt-hour. The UK equivalent also declined. 

 

--With assistance from Anna Shiryaevskaya.

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