Almost five times cheaper than in August: The wholesale price of natural gas in Europe fell to its lowest level since Russia’s invasion of Ukraine on Monday thanks to a mild winter that has kept supplies intact, but analysts warn that the market will be unpredictable in the coming months, reports AFP.

The benchmark natural gas price in Europe for one megawatt-hour (MWh) to be delivered next month under the TTF contract in the Dutch market was around €73 on Monday, the lowest since February 21, 2022 .

This wholesale price has fallen by almost 50% in one month and is well below the summer high, which peaked at €342 in August 2022.

The price of gas began to rise even before the war in Ukraine, but it really exploded from February 24, 2022. The closure of several gas pipelines between Russia and Europe, until then its biggest consumer, led to higher prices as less gas flowed into the continent.

Gazprom’s gas exports to the European Union and Switzerland will fall by 55% in 2022, Gazprom said on Monday. The Russian giant supplied Europe with 62 billion cubic meters in 2022, compared to 138 billion in 2021, according to estimates by energy market analyst and Sciences Po professor Thierry Bros.

Why are prices falling today?

Firstly, because Europe filled up its reserves last summer, secondly, because the autumn was very mild, and thirdly, because households and companies voluntarily reduced consumption: Europeans burned significantly less gas in their homes .

Thus, stocks remain very comfortable to start the year, so there is less need to buy gas.

European gas reserves were 83.3% full on Monday. According to Gas Infrastructure Europe, French reserves are 84% full and German reserves are 90% full.

“Uncertainty Principle” / Prices may rise

The price of gas affects the price of electricity, as many European power plants burn gas to produce electricity.

In France, the wholesale price of electricity for delivery in 2023, which was above 1,000 euros/MWh at the end of August, fell to 240 euros on Friday, the lowest since April.

But these fluctuations in wholesale prices are not directly reflected in the prices charged to consumers, as suppliers adjust their rates, especially at a time when prices can jump from day to day.

Looking ahead, analysts remain very cautious

“It all depends on what Vladimir Putin decides about gas flows to Europe,” Brause told AFP. called the “Kremlin principle of uncertainty”, which tests European unity.

As an example, he cites the possibility of Russia exporting gas through a pipeline that would pass through Belarus, hoping to attract countries such as Italy and Germany.

But “if Europe does not receive at least 30 billion cubic meters of Russian gas, it will be difficult to fill storage this summer and prices may rise again,” he said.

However, he said, the continent is “better prepared” than last year. In January 2022, European gas reserves were only 54% full, before the start of the conflict.

The same uncertainty applies to industry. “If there is a cold wave at the end of January, prices will rise again,” warns Nicolas de Warren, president of the association that unites the largest energy consumers in France (chemical, pharmaceutical, steel, food industry, etc.).

He also fears competition for liquefied natural gas (LNG) cargoes between Europe and Asia, where prices “are now higher than European prices”.

To ensure greater visibility for European industries in the future, “we will now discuss a return to long-term gas contracts with exporting countries, Norway, Qatar, Nigeria and possibly Iraq,” he stressed.