European natural gas prices fell back into their normal trading range for the first time since the start of the energy crisis on Thursday, falling below €30 per megawatt hour to reach the lowest level since June 2021.
The price of benchmark TTF fell as low as €29.75/mwh, down more than 8 per cent on the day, to levels last seen before Russia started squeezing Europe’s pipeline gas supplies ahead of its invasion of Ukraine. TTF later rose slightly to close at €30/mwh.
The low prices are in stark contrast to last summer, when TTF soared to more than ten times its normal level, peaking above €340/mwh after Russia slashed gas exports to Europe. The decline highlights how Europe has largely overcome the worst of Moscow’s weaponisation of energy supplies.
The drop is also a sign on the ample amount already in storage as traders refill ahead of next winter, and relatively tepid gas demand in the region.
Europe ended the winter with gas storage well above the seasonal average, and has continued to build up its inventory. Storage is now nearly 65 per cent full and nearly a fifth above the previous 5-year average, according to industry body Gas Infrastructure Europe.
“Back in January I was saying we would see prices fall below €30/mwh over the summer. But I certainly was not expecting it as early as May,” said Tom Marzec-Manser at energy consultancy ICIS.
Since the end of March, the TTF price has fallen for six consecutive weeks, plunging nearly 27 per cent.
“Will we see more downside on the short-term contracts? Yes, no doubt,” Marzec-Manser said. He added that a lack of demand for spot liquefied natural gas from Asia, which competed with Europe for the super-chilled fuel throughout last year, was another factor in European gas prices trending lower.
Despite the fall in prices, traders and analysts remain cautious as the global gas market remains finely balanced. Russia’s pipeline flows to Europe, which cannot be redirected to other export markets, are still 90 per cent lower than before the invasion of Ukraine. Russia once met around 40 per cent of EU demand.
The International Energy Agency, in its most recent quarterly gas market report, said the demand and supply balance for global gas “is subject to an unusually wide range of uncertainties” this year, ranging from weather, availability of LNG and the possibility of further declines in Russian pipeline gas to Europe.
But even if prices start to rise again as winter approaches few expect they will scale anywhere near the levels seen at the height of the crisis.
Prior to Russia starting to squeeze supplies in 2021 — before slashing them after invading — TTF had traded close to €30/mwh but never above.