Natural Gas Prices in Europe Fall Below 50 Euros for the First Time in 17 Months

For the first time in 17 months, the futures prices of European natural gas have fallen below the level of 50 euros, reports Bloomberg. Prices have dropped by more than 80 percent compared to the peak in August when Russia ‘turned off the tap’ to Europe, striking at the region’s economy and pushing inflation to its highest level in several decades.

This winter’s significant relief has come from relatively mild weather conditions as well as a strong influx of liquefied natural gas from the U.S. and Qatar. However, the question arises as to whether the price drop will last for long. Certainly, as winter approaches its end and the demand for heating decreases, lower prices in Europe could make gas more economical for electricity generation compared to alternatives like coal.

– “Gas prices have fallen within the fuel range, suggesting that it is now more cost-effective to operate gas plants with the highest efficiency compared to the least efficient coal plants,” said BloombergNEF analyst Stefan Ulrich.

Storage Still Filled

A sign of optimism for Europe also comes from the fact that gas storage is still supplied, and it is believed that the region will be able to easily get through this and next winter. Given that Russian gas in Europe is becoming increasingly scarce and is far below the levels seen in previous years, it seems that European nations have adapted to the new situation and found alternative sources.

Thus, the German utility company Uniper SE, which was rescued by the government last year after the energy crisis brought it to the brink of collapse, stated that it will overcome the problems caused by Russian gas supply disruptions by 2024 at the latest, but it will not be able to avoid high costs, and replacing lost volumes is also a challenge.

Earlier this month, the European ban on the import of refined oil products from Russia came into effect, and according to Eurostat data, Russia exported diesel and gasoline worth more than 2.3 billion euros to the EU in October. Germany alone purchased more than a quarter of the total amount of imported Russian oil derivatives.

The embargo was agreed upon in June as part of the sixth package of sanctions against Russia due to the invasion of Ukraine, and it follows the ban on the import of Russian crude oil by sea, which has been in effect since December.