(Bloomberg) -- European natural gas prices slumped further to a two-year low as a weak regional economy hits the prospects for demand.                

Germany suffered a recession in the first quarter, highlighting the continent’s struggle in emerging from a crisis that was partially created by record-high energy costs last year. Industrial demand for gas in Europe has been sluggish despite the recent dip in prices, resulting in an oversupplied market.

Much fuller-than-normal inventories and strong availability of liquefied natural gas are also quickly taking away any risk for the next winter. At the same time, the more than 65% slide in gas futures this year has brought some relief for Europeans suffering from surging inflation. British consumers are set to see lower energy bills.

The market is now oversupplied, according to Philippe Francois, a senior portfolio manager at Danske Commodities A/S. If nothing changes that, prices will likely shift lower again in July, he said.

Also read: Traders Say Some of Europe’s Gas Demand May Never Come Back

Current prices are also doing little to spur Chinese buying, where a flagging economic revival is undermining fuel demand. The country’s biggest LNG importers are noticeably absent from the spot market, and are even offering to sell shipments, according to traders. While some smaller buyers in the region are starting to take advantage of cheaper gas, that’s not been enough to counter the overall weakness. 

Dutch front-month gas, Europe’s benchmark, settled 8.4% lower at €25.45 per megawatt-hour, the lowest since May 2021. The UK equivalent contract fell 9%.

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