A worker walks past gas pipelines connecting a ship with a floating storage and regasification unit to the mainland in Wilhelmshaven, northern Germany on Dec. 17, 2022. EU energy ministers argue over a proposed gas price cap.
Michael Son | Afp | Getty Images
LONDON — European natural gas prices fell this week to levels not seen since Russia’s invasion of Ukraine.
Natural gas futures for the first month the Dutch Title Transfer Facility, the reference contract in Europe, dipped below 77 euros ($81.91) per megawatt hour in recent weeks, a level not seen since February – ahead of the start of a full-scale war in Ukraine.
As of Thursday morning, they were trading around 81.5 euros.
At their peak in August, European gas prices reached more than €345/MWh as Russia’s weaponization of its natural gas exports to the rest of the continent in response to EU sanctions and skyrocketing summer temperatures boosted demand while decreasing supply. limited. .
Rising prices pushed up household energy bills and sparked a cost-of-living crisis across much of the continent.
However, unusually warm winter weather across much of northwestern Europe has reduced heating demand and allowed the continent to replenish its gas supply after declines during several cold spells in recent months.
Goldman Sachs forecast in November a sharp fall in European gas prices in the coming months as countries temporarily gained the upper hand in terms of supply problems.
As a rule of thumb, an increase or decrease in gas prices of €100 per MWh will change the gas bill of the Eurozone economy – by gas consumption in 2021 – by an amount equivalent to almost 3% of GDP once households and consumers have to bear the full cost of the gas price change,” Berenberg chief economist Holger Schmieding said in a note last month.
“Since the EU imports some of its gas on long-term, fixed-price contracts, the real impact on the gas import bill is not as pronounced… prices – and the relief from any correction – may be more pronounced than the rule of thumb suggests. “
The The European Union agreed last week on a temporary mechanism to limit excessive gas prices, which takes effect on February 15.
The “market correction” mechanism is automatically activated if the TTF price of the first month exceeds EUR 180/MWh for three consecutive days and if it deviates by EUR 35 or more from a reference price for global LNG (liquefied natural gas) over the the same three days.