Mild weather has stunted demand for natural gas in Europe this winter, keeping prices low in what could have been a volatile market in light of wartime sanctions and supply constraints. David Sheppard reports in the Financial Times:
The price of European natural gas has fallen to its lowest level since the build-up to Russia’s full-scale invasion of Ukraine, boosting the EU and UK economies and delivering a blow to President Vladimir Putin’s war effort.
The benchmark gas price on Friday fell below €50 per megawatt hour for the first time in almost 18 months, down to €48.90/MWh, as traders report growing confidence that European countries will avoid shortages this winter and next. The gas benchmark peaked at more than €300/MWh in August 2022.
Helped by mild weather, ample storage and efforts to source alternative supplies, European gas prices have tumbled by as much as 85 per cent since August 2022, when big cuts in Russian supplies led to alarm about possible blackouts.
“Europe looks like it has successfully weaned itself off Russian gas,” said Henning Gloystein, at consultancy Eurasia Group. He added that gas was “still expensive, but no longer needs to price in the risk of outright shortages”.
The return of prices to 2021 levels marks a setback for Putin ahead of the first anniversary of the Ukraine war on February 24.
Moscow’s energy income, which initially soared after the invasion and helped fund the Kremlin’s military offensive, has now slumped. Russia’s oil now sells at a deep discount and gas prices are no longer high enough to compensate for the country’s drop in export volumes.
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