Gas prices in Europe hit their lowest level in three months, due to lower demand from industry and households.
On Monday morning, prices on the Dutch Securities Transfer Facility (TTF), Europe’s main trading platform, hovered around €150 per megawatt-hour, sometimes falling below that threshold, following settling at €156 on Friday. .
The last time prices fell below the 150 euro threshold was at the beginning of July.
The European Commission has announced that EU gas storage facilities, which are essential to meet additional winter demand, are over 90 % of their capacity.
This relatively good news offers the 27 a respite in their efforts to contain the energy crisis.
The most recent prices are far from the historical record of 349 euros reached at the end of August, a month that raised alarm in capitals and fueled calls for a Europe-wide wholesale gas price cap.
However, prices remain exceptionally high. A year ago, the TTF indicated that gas cost 38 euros per megawatt hour.
High gas prices have a ripple effect on the entire European energy sector. Gas indeed determines the final price of electricity. This surge leads to that of electricity bills for households and businesses.
The European Union is exploring various avenues, in particular targeted price caps and another reference than the TTF, in order to reduce the influence of gas prices on electricity, but the Member States are still divided on the most appropriate – and least risky – path to follow.
The downward trend in gas prices should guide the ongoing debate and might serve as an argument for Member States, such as Germany and the Netherlands, which have advocated more cautious methods rather than forced intervention on the market.
“The fall in gas prices is due to the fact that the storages are now almost full and the mild temperatures so far“, estimates Simone Tagliapietra, researcher at the Bruegel Institute.
“What is important is that the markets are seeing demand decrease, particularly in the industrial sector.“
Energy saving has become the centerpiece of the EU’s response to the energy crisis. They are seen as essential to rebalancing the mismatch between supply and demand.
Last July, Member States adopted the first-ever coordinated plan to reduce gas consumption by 15% between August and March.
The plan was designed as a preventive shield once morest Russia’s manipulation of gas supplies, which is fueling market speculation and driving prices to record highs.
The EU’s suspicions proved correct when the Kremlin shut down the gas pipeline Nord Stream 1 in retaliation for Western sanctions.
A separate plan, focusing on mandatory energy savings during peak periods, was approved at the end of September.
The industrial sector has already been forced to reduce production hours and save money due to the energy crisis.
Industrial production in the eurozone fell 2.3% in July from the previous month, according to Eurostat. Consumer confidence is at an all-time low (-28.8% in the euro zone), falling more sharply than during the covid-19 pandemic.
A non-paper drafted by the European Commission reports significant gas savings in most EU countries, although some, such as Ireland, Greece, Sweden and Spain, have actually increased their consumption.
The President of the European Central Bank estimated last month that the economic outlook was darkening and that business activity was going “slow down noticeably“. Christine Lagarde, also predicted two consecutive quarters of economic contraction in winter, which would amount to a technical recession.
Analysts believe that, although a recession would be painful for Europeans, it would dampen demand and further lower gas prices.
