European natural gas prices return to pre-Ukraine war levels

A worker walks past gas pipes that connect a Floating Storage and Regasification Unit ship with the main land in Wilhelmshaven, northern Germany on December 17, 2022. EU energy ministers are wrangling over a proposed price cap on gas.

The price of natural gas in Europe fell this week to levels not seen in a long time.

Natural gas futures on the Dutch Title Transfer Facility, the benchmark contract in Europe, plummeted in recent weeks to bottom out below 77 euros per megawatt hour, a level not seen since February.

They were trading at around 81.2 euros.

In August, European gas prices reached a peak of 345 euros/MWh due to Russia's weaponization of its natural gas exports to the rest of the continent in response to EU sanctions.

The cost of living has gone up because of the spiking prices.

Warm weather through winter in northwest Europe has reduced demand for heating and allowed the continent to replenish its gas inventory after several cold snaps.

Europe's gas prices are expected to fall in the coming months as nations gain an upper hand on supply issues, according to Goldman.

A rise or fall in gas prices by 100 per MWh changes the gas bill of the euro zone economy by an amount equal to 3% of GDP once households and consumers have to bear the full costs.

As the EU imports some gas under longer-term fixed-price contracts, the impact on the gas import bill is not quite as pronounced.

A temporary mechanism to limit excessive gas prices will come into force on February 15.

If the front-month TTF price exceeds 180 euros/MWh for three consecutive days, and if it deviates by 35 euros or more from a reference price, the mechanism will be triggered.