The price of European natural gas has fallen to its lowest level since the build-up to Russia’s full-scale invasion of Ukraine, boosting the EU and UK economies and delivering a blow to President Vladimir Putin’s war effort.

The benchmark gas price on Friday fell below €50 per megawatt hour for the first time in almost 18 months, down to €48.90/MWh, as traders report growing confidence that European countries will avoid shortages this winter and next. The gas benchmark peaked at more than €300/MWh in August 2022.

Helped by mild weather, ample storage and efforts to source alternative supplies, European gas prices have tumbled by as much as 85 per cent since August 2022, when big cuts in Russian supplies led to alarm about possible blackouts.

“Europe looks like it has successfully weaned itself off Russian gas,” said Henning Gloystein, at consultancy Eurasia Group. He added that gas was “still expensive, but no longer needs to price in the risk of outright shortages”.

The return of prices to 2021 levels marks a setback for Putin ahead of the first anniversary of the Ukraine war on February 24.

Moscow’s energy income, which initially soared after the invasion and helped fund the Kremlin’s military offensive, has now slumped. Russia’s oil now sells at a deep discount and gas prices are no longer high enough to compensate for the country’s drop in export volumes.

The fall in gas prices has also stoked expectations that EU countries and the UK may only experience a mild recession this year, or could entirely avoid an economic contraction. The European Commission says the price slide, combined with government and household spending, has boosted the EU’s short-term prospects.

Household bills are unlikely to fall as fast, as suppliers will have hedged gas and electricity for consumers when prices were at much higher levels. But the decline in the wholesale price should eventually feed through to lower bills.

Soaring gas prices had stoked a cost of living crisis and fed into high inflation since Russia initially squeezed supplies in 2021. Moscow then slashed exports in retaliation for western support for Ukraine following the invasion.

Prices remain elevated compared with historical levels of about €10 to €30 per megawatt hour but analysts said they no longer threatened to trigger a deep recession across Europe.

Gas prices, which last summer were so expensive that they were equivalent to almost $500 a barrel of oil, have now fallen to about $85 a barrel.

With only six weeks of winter remaining, gas storage levels in Europe, one of the key metrics for avoiding shortages, stood at about 65 per cent full as of Wednesday, according to trade group Gas Infrastructure Europe. That is well above normal levels for the time of year.

Gloystein said industrial gas demand in Europe has fallen about 20 per cent in the past year without a significant drop in manufacturing output because of greater efficiencies and fuel switching.

Long-range weather forecasts now predict a relatively mild March that should reduce demand for heating. Analysts said that should make refilling storage ahead of next winter relatively straightforward even with lower Russian supplies than at the start of 2022.

They also pointed to the imminent return of the Freeport liquefied natural gas export terminal on the US Gulf Coast, which provided about a fifth of all US export capacity before an outage last summer, as a source of renewed supplies to the market.

Tom Marzec-Manser, at ICIS consultancy, cautioned that the drop in prices may start to stoke demand for gas in Asia, particularly as China’s economy reopens.

“While storage levels are high in Europe and Asia is not showing any immediate signs of trying to outcompete the Atlantic for cargoes, the falling price will undoubtedly reignite some demand for gas, both in the industrial and power sectors,” he said.

“This means that, while the TTF [benchmark price] is creeping lower, any fallback to pre-Covid wholesale gas prices is unlikely to happen yet.”


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