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3 Mar, 2023 12:45

EU gas prices drop to 18-month low

Unusually warm weather and strong winds continue to ease concerns over energy supplies
EU gas prices drop to 18-month low

Spot prices for natural gas in the EU have dropped below $500 per thousand cubic meters for the first time since mid-2021, data from the London Intercontinental Exchange (ICE) showed on Friday.

The cost of gas futures for April delivery at the TTF hub in the Netherlands stood at $497 per thousand cubic meters, or roughly €44 ($46) per megawatt-hour in household terms around 09:20 GMT, having dropped 3% from the previous day’s close, according to ICE data.

Gas prices in the region have been steadily dropping since late last year. Market experts explain the trend as due to unusually warm weather, which caused a decrease in energy demand, and strong winds, which allowed wind-powered electricity plants to boost their energy production. As a result, European utilities have little need to tap gas reserves in underground storage facilities, which therefore remain filled to record highs for the season.

However, despite the gradual drop in prices, they remain more than twice as high as the average over the last decade. Such steadily high prices have not been recorded since 1996, when the TTF gas quotes surged from $250-300 per thousand cubic meters to over $1,000 in a matter of six months.

Last summer, European gas prices surpassed their historic peak price at €345 per megawatt-hour. The surge was brought about by concerns regarding the future of Russian energy supplies, impacted by the Western sanctions against Moscow.

In order to avoid future spikes in gas prices, the EU countries agreed on a gas market correction mechanism late last year, which would cap the market price of gas at €180 per megawatt-hour if gas futures trade at a higher level for three consecutive days. The measure came into force on February 15.

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