London (CNN) Natural gas prices in Europe have fallen to their lowest level in nearly 18 months, the latest sign that the region has avoided a feared energy crisis.
Benchmark wholesale gas prices fell nearly 5% on Friday to €49 ($52) per megawatt-hour, their lowest level since September 2021 and a fraction of an all-time high of €320 last August, according to data from Independent Commodity Intelligence Service.
It’s a remarkable turnaround for a continent that suffered shortages and possible blackouts just a few months ago when Russia – once its biggest supplier – slashed gas exports to Europe in retaliation for EU sanctions over its war in Ukraine .
The fall in prices will further reduce the risk of a recession in Europe.
Prices have fallen due to the unusually warm weather this winter, as well as the region’s efforts to conserve gas, find alternative suppliers and fill storage facilities.
Gas supplies across the European Union were 65% full on Thursday, according to Gas Infrastructure Europe, an industry association. That is well above the 45% the EU currently had on average in the five years to 2022.
The bloc has also boosted imports of pipelined natural gas from Norway and liquefied natural gas (LNG) – a refrigerated, liquefied form of gas that can be transported via marine tankers – mainly from the United States and Qatar.
“Europe looks like it has successfully weaned itself off Russian gas,” Henning Gloystein, director of energy, climate and resources at Eurasia Group, told CNN.
“It is still relatively expensive compared to its pre-crisis long-term average, but current price levels no longer reflect the risk of shortages, as it did for much of last year.”
Salomon Fiedler, an economist at the Berenberg bank, said in a note Friday that he expected Europe to avoid an energy crisis next winter if it maintains its current import levels from non-Russian suppliers at average temperatures; gas consumption remains 20% below average; and domestic gas production remains the same.
“Worst case scenario, a combination of no Russian supplies, colder weather and significantly less [gas] savings – of just 10% – would expose the EU to a risk of deficits next winter,” he said, although this is an “unlikely combination”.
Compete with China
But gas demand in China could flare up again this year, tightening the global LNG market and putting upward pressure on prices.
The world’s second-largest economy dropped its strict zero-Covid policy in December after more than three years, driving up estimates for global economic growth and energy consumption expectations as citizens return to spending and travel.
“Europe is in a much better position than feared a few months ago,” Massimo Di Odoardo, vice president of gas and LNG research at Wood Mackenzie, told CNN. “But it is only from 2025, when a significant amount of LNG enters the market, that European prices can return to normal.”