Pipeline system of the Nord Stream 1 gas pipeline near Lubmin in Germany. Edouard MERLO / AFP
Thanks to the abnormally high temperatures, the price of European gas has returned to a price similar to that of September 2021.
The price of gas on the European market fell below the threshold of 50 euros per megawatt hour on Friday, almost seven times less than at its all-time high in the first days of the Russian invasion of Ukraine.
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Fears of shortages at the height of winter due to Russia’s crucial role as a supplier to Europe have subsided. “European gas prices have fallen by 50% since November thanks to abnormally high temperatures“which limit the use of heating”and limited competition for liquid natural gas (LNG) from China when anti-Covid measures were still relevant“comments Edoardo Campanella, analyst at UniCredit.
Unheard of since September 2021
The Dutch TTF futures contract, which is a benchmark in the European market, traded for less than 50 euros on Friday morning for the first time since September 2021. “Without the drastic reduction in Russian gas deliveries, Europe could currently enjoy above-average growth rather than suffering growth stagnation.“, deplores Salomon Fiedler, analyst at Berenberg.
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If the fall in prices is good news for countries struggling against galloping inflation strongly linked to energy prices, the respite could be short-lived. “Despite high reserves, if temperatures normalize in the winter of 2023-24, lowering consumption will be more difficult, making competition with China for LNG more intense“warns Edoardo Campanella.
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