Stay informed with free updates
Simply sign up to the EU energy myFT Digest — delivered directly to your inbox.
The price of European gas has fallen to a level last seen before Russia started curtailing supplies in 2021, offering hope that an energy crisis that has engulfed the region for the past three years may be coming to an end.
Strong imports of liquefied natural gas, warm weather and demand reduction as a result of high prices in recent years have all helped keep gas stored in the EU’s underground storage facilities at historically high levels during this winter, putting pressure on prices.
The price of Title Transfer Facility (TTF), the European benchmark, fell to as low as €22.53 per megawatt hour on Friday, the lowest since May 2021, on course for a third consecutive weekly decline.
Europe’s energy crisis began in 2021 as the region exited a prolonged cold winter with low natural gas storage levels. Concerns over tight supplies were exacerbated as Russia started sending less gas to Europe, with traders speculating at the time that it was a tactic to pressure European governments, including Germany, to approve the start-up of the highly controversial Nord Stream 2 gas pipeline.
European gas prices peaked in the summer of 2022, soaring to more than €300/MWh at one point, as Russia further squeezed its supplies to the region following its invasion of Ukraine and the weaponisation of its abundant gas reserves.
Since then, concerted efforts by EU nations to curb demand, as well as strong imports of LNG from countries such as the US and consecutive warm winters have all helped ease Europe’s gas supply crunch.
“Europe has already passed its greatest test, which happened just after the shock loss of most of its Russian gas,” said Natasha Fielding, head of European gas pricing at Argus Media.
Piped Russian gas, which accounted for 40 per cent of the EU’s supplies before the Ukraine war, has fallen to 8 per cent, according to the European Commission. EU gas storage facilities were more than 64 per cent full as of Wednesday, a record high for the time of the year, according to data from Gas Infrastructure Europe, an industry body.
However, the switch from a dependence on piped gas from Russia to a reliance on seaborne shipments of LNG, mainly from producers in the US and the Middle East, meant Europe could still experience future price spikes, Fielding added.
“Europe must compete with Asia for its LNG supplies, and we have yet to see how this would play out in a once-in-a-decade cold weather event that hits both demand centres at once,” she said.
Until new LNG production comes online from Qatar and the US in 2026, global gas demand was likely to continue to outstrip supply, said Tom Marzec-Manser, head of global gas analytics at ICIS.
“It is a little too early to declare the energy crisis over,” he said. “We still do have a global mismatch between gas supply and demand . . . so it will be after next winter that we will have greater confidence that the extreme volatility of the last few years is genuinely over.”
Read the full article here
