European gas: wholesale prices 5 times lower than in August

In Europe, the wholesale price of natural gas has fallen to its lowest level since the start of the Russian-Ukrainian war. Prices have been falling for several weeks now, and a megawatt-hour is now selling for 5 times less than in August.


The megawatt-hour at its lowest level since February 2021

The Rotterdam Title Transfer Facility (TTF), the benchmark index for continental Europe, fell by 4.67% on Monday January 2 to 72.75 euros per megawatt-hour for February delivery. The megawatt-hour thus fell to its lowest level since February 21, 2022, 3 days before Russia invaded Ukraine.


Last summer, European gas prices increased 20-fold. In August, a megawatt-hour was selling for 320 euros, compared with around 15 euros previously. This upward trend had begun before the start of the war in Ukraine in autumn 2021, but intensified with the Russian offensive.

High gas inventory levels and falling demand

If prices continue to fall despite the closure of almost all pipelines between Europe and Russia, this is largely due to the high level of gas stocks on the continent. Massive imports of liquefied natural gas (LNG), mainly from Qatar and the United States, have helped to replenish reserves.

At the same time, demand was lower due to mild autumn temperatures. According to GRTgaz data, gas consumption in France since August 1 has fallen by 22.1% for industrial customers and 14% for public distribution networks, compared with the same period in 2018.


As a result, the fill rate of gas stocks in Europe is still very high: on Monday, it reached 83.3% according to Gas Infrastructure Europe figures, i.e. 30% higher than at the same time in 2021, and 10% higher than the average fill rate over the last 5 years.


Lower gas prices also mean lower electricity prices, as many European power plants use gas to generate electricity. The wholesale electricity price for 2023, which at the end of August had passed the 1,000 euro per megawatt-hour mark in France, settled on Friday at 240 euros, its lowest level since April.

However, the fall in wholesale gas and electricity prices does not yet mean that the situation is returning to normal.

On the one hand, this reduction is not immediately passed on to consumers, as suppliers smooth out prices to avoid excessive and frequent variations. On the other hand, despite the drop in prices observed over the last few weeks, they remain 3 times higher than in the summer of 2021. Lastly, Europe has yet to find a sustainable alternative to Russian gas imports, and supply difficulties are still to be expected in the months ahead.