European Gas Prices Have Returned To Levels Seen Before The Ukraine War

This week saw a decline in European natural gas prices to levels not seen since before Russia’s invasion of Ukraine.

In recent weeks, front-month natural gas futures on the Dutch Title Transfer Facility, the standard contract in Europe, fell to a low of less than 77 euros ($81.91) per megawatt hour, the lowest level since February, just before the start of a full-fledged conflict in Ukraine.

They were trading at around 81.5 euros as of Thursday morning.

Gas prices in Europe reached their highest level in August, topping 345 euros/MWh as demand increased and supply shrank as a result of Russia’s decision to weaponize its natural gas exports to the rest of the continent in response to punitive EU sanctions and record-high summer temperatures.

A cost-of-living crisis has spread across much of the continent as a result of the skyrocketing prices, which drove up household energy bills.

Nevertheless, the unseasonably warm weather that has persisted throughout the winter in much of northwest Europe has decreased the need for heating and allowed the continent to restock its gas supplies after they had been depleted by several cold snaps over the previous few months.

As nations temporarily gained the upper hand on supply issues, Goldman Sachs predicted in November that European gas prices would fall precipitously in the coming months.

“As a rule of thumb, a rise or fall in gas prices by €100 per MWh changes the gas bill of the euro zone economy — at 2021 gas consumption — by an amount equal to almost 3% of GDP once households and consumers have to bear the full costs of the change in gas prices,” Berenberg Chief Economist Holger Schmieding explained in a note last month.

“As the EU imports some gas under longer-term fixed-price contracts, the actual impact on the gas import bill is not quite as pronounced … but as electricity prices are still largely linked to gas prices, the total pain of high gas prices — and the relief from any correction — may be more pronounced than the rule of thumb suggests.”

A temporary mechanism to control excessive gas prices was approved by the European Union last week, and it will go into effect on February 15.

If the front-month TTF price exceeds 180 euros/MWh for three days in a row and deviates by 35 euros or more from a reference price for global LNG (liquefied natural gas) over the same three days, the “market correction” mechanism will automatically kick in.

(Adapted from

Categories: Economy & Finance, Geopolitics, Strategy, Sustainability, Uncategorized

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