LONDON (CNN) Europe’s natural gas prices have fallen to their lowest level in almost 18 months in the latest sign the region has avoided a much-feared energy crisis.
Wholesale gas prices fell nearly 5% on Friday to hit €49 ($52) per megawatt-hour, their lowest since September 2021 and a fraction of the all-time high of €320 hit in August last year, according to data from the Independent Commodity news service.
It’s a remarkable turnaround for a continent that was facing shortages and possible power outages just months ago, when Russia – once its biggest supplier – slashed gas exports to Europe in retaliation for EU sanctions over its war in Ukraine.
The fall in prices will further reduce the risk of a recession in Europe.
Prices have been pushed down by unseasonably warm weather this winter and the region’s massive effort to conserve gas, find alternative suppliers and fill up its storage facilities.
According to Gas Infrastructure Europe, an industry association, gas storage facilities across the European Union were 65% full on Thursday. That is well above the 45% that the EU had averaged at that point in the five years to 2022.
The bloc has also boosted imports of pipeline natural gas from Norway and liquefied natural gas (LNG) – a refrigerated, liquid form of gas that can be transported via sea tankers – mainly from the United States and Qatar.
“Europe looks like it has successfully weaned itself off Russian gas,” Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNN.
“It’s still relatively expensive compared to the long-term pre-crisis average, but current price levels no longer reflect a risk of shortages, as they did for much of the past year.”
Salomon Fiedler, an economist at Berenberg Bank, said in a note on Friday that he expected Europe to avoid an energy crisis next winter if it maintained – below average temperatures – its current level of imports from non-Russian suppliers; Gas consumption remains 20% below average; and domestic gas production remains the same.
“In the worst case, a combination of no Russian deliveries, colder weather and significantly reduced [gas] Savings – as little as 10% – would put the EU at risk of shortages next winter,” he said, although it was an “unlikely combination”.
competition with China
But demand for gas in China could pick up sharply again this year, straining the global LNG market and putting upward pressure on prices.
The world’s second-largest economy abandoned its strict zero-Covid policy in December after more than three years, raising estimates for global economic growth and expectations for energy use as its citizens resume spending and travel.
“Europe is in a much better position than feared just a few months ago,” Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, told CNN. “But only from 2025, when a sizeable supply of LNG comes on the market, could European prices return to some kind of normality.”