European Gas Prices Fall to Lowest Level Since Energy Crisis, Boosting Hopes of Stronger Economic Recovery

European gas prices have fallen to their lowest level since the start of the energy crisis, boosting hopes of a stronger economic recovery as energy pressures ease.Financial Times” British.

TTF, the European price benchmark, was lower, at 35.20 euros ($39.46) per megawatt-hour on Friday, a level last seen in July 2021 when Russia began squeezing energy supplies in the country. Europe before its invasion of Ukraine.

Later, the index rose slightly to end the week at 35.95 euros, equivalent to approximately 40.30 US dollars.

The TTF index peaked at more than 340 euros ($381) per megawatt-hour last summer after Russia cut gas exports to Europe, stoking inflation and sending energy bills skyrocketing.

The decline of about 35 euros per megawatt hour reinforced the opinion that energy prices are returning to normal after Europe succeeded in exploiting alternative gas sources, accelerating the spread of renewable energy and taking advantage of the mild winter that left gas storage sites full.

Oil prices have also fallen, with Brent crude falling to nearly $75 a barrel after trading above $100 a barrel for most of the past year, down to roughly where it was trading before the invasion of Ukraine.

Morgan Stanley analyst Martin Rats said Europe is now in a position to refill gas storage sites by 100 percent, which is crucial to meet winter demand even if Russian supplies drop to zero.

He noted that prices are falling at the present time to slow the arrival of seaborne shipments of liquefied natural gas, which Europe rushed to secure last year to replace Russian flows.

“There is not enough room in storage capacity in Europe,” said Rats, noting that storage capacity was already at 60 per cent of capacity, compared to around 35 per cent at the end of winter last year.

And he added, “At some point, the flow of LNG will need to slow down to prevent stocks from overfilling.”

The decline in energy costs helped calm inflation expectations, allowing central banks to slow the rate of interest rate increases, given that the European Central Bank raised interest rates by a quarter of a percentage point this week.

However, gas prices are still high compared to historical levels, in 2019 the average price was less than €15, while the pre-crisis price peak was €29.17 in 2018, which, adjusted for inflation, is still slightly below where it is. Trade prices today.

However, gas traders and analysts gathered at the annual Flame conference in Amsterdam this week cautioned against complacency, saying Europe still faces potential challenges in the coming winter.

In this regard, the Secretary-General of Eurogas, James Watson, said: “We have passed the crisis because we witnessed a mild winter and decreased Chinese demand for LNG shipments.”

“We were lucky,” said Watson, whose organization represents the wholesale and retail gas sectors in the European Union.

And the International Energy Agency had indicated, in its last quarterly report on the gas market, that the balance of global gas supply and demand is “subject to an unusually wide range of uncertainties” this year, starting with the weather and not ending with the availability of liquefied natural gas, in addition to the possibility of more. From the declines in the Russian gas pipeline to Europe.

The remaining Russian pipeline through Ukraine and Turkey now accounts for less than 10 percent of Europe’s gas imports, compared with about 40 percent before the invasion, but traders believe the halt in imports from it could lead to a further rise in prices.

Gas markets reflect some of these risks. TEF contracts for winter delivery are still trading above €50 per MWh, and could rise further if the weather is less mild than the winter that just ended, or if Asia competes more for natural gas. liquefied.

“There are a lot of other things that could happen,” said a senior trader on the sidelines of a conference in the Netherlands to discuss energy affairs in Europe.

He noted that although there is no likelihood of similar hikes to what happened last summer, experts believe that prices may reach 150 euros per megawatt hour.