The front-month contract at Europe’s premier TTF gas hub dipped below €50 per MWh ($567 per 1,000 cubic metres) on February 21 for the first time this year, amid easing fears of shortages, warm weather, ample LNG and lower industrial demand.

The March TTF contract averaged €49.3 per MWh for the trading session – down from €140 as recently as early December. European gas prices have fallen by as much as 85% since spiking in August last year, reflecting growing trader confidence that the continent will not only make it through this winter with enough gas in stock, but is in a good position to avoid shortages next winter as well.

Europe’s gas storage facilities are currently 63.7% full (chart), representing a historically high level of utilisation for this time of year. This is not only because of the aforementioned factors, but also mandatory targets that the EU introduced last summer for member states to bolster stocks before winter.

The record low price at TTF comes as the first anniversary of Russia’s invasion of Ukraine nears. Moscow is widely accused of weaponising its gas supply over the past year, restricting volumes in order to put pressure on the West to make concessions in the conflict. But even though Russian pipeline gas flow to Europe is not at only 10-15% of the level it was a year ago, gas prices have rolled back to low levels not seen since late 2021.

Gas prices nevertheless remain significantly higher than in previous years, meaning that the energy crisis is far from over. Expectations are that the market will remain tight for several more years, before a wave of new LNG supply comes on stream in the middle of the decade.

In the nearer term, the outlook will hinge largely on developments in China, which is predicted to see an economic recovery and a subsequent revival in LNG imports this year after easing its COVID-19 restrictions. In positive news for European consumers, however, the Freeport LNG terminal in Texas secured approval to restart production at one of its liquefaction trains on February 21. The facility was a major supplier to the European market prior to its shutdown last year after an explosion.

Reflecting the impact of high prices on European demand this year, Eurostat data shows that EU gas consumption was 19.3% lower between last August and January this year versus the average for the same six-year period between 2017 and 2022.

The drop in demand was more than enough to fulfil the goal that Brussels set as part of its REPowerEU plan to cut reliance on Russian gas The member state that reduced gas consumption by the least percentage was Ireland, which cut use by only 0.3%. On the other hand, Finland, Lithuania and Sweden cut demand by 57.3%, 47.9% and 40.2% respectively.

The extent of the decline grew larger over the course of most of the August 2022-January 2023 period. Demand was 14% lower than the five-year average in August, 14.3% lower in September, 24.7% in October and 25% in November.