European gas prices have retreated to levels last observed before Russia initiated supply cutbacks in 2021, signaling a potential resolution to the energy crisis that has plagued the region for the past three years.

A combination of factors, including robust imports of liquefied natural gas (LNG), milder weather conditions, and demand moderation resulting from persistently high prices in recent years, has contributed to maintaining historically elevated levels of gas storage in the European Union’s underground facilities throughout the winter, exerting downward pressure on prices.

The Title Transfer Facility (TTF), Europe’s benchmark gas price, descended to as low as €22.53 per megawatt hour on Friday, marking its lowest point since May 2021 and embarking on a third consecutive week of decline.

The energy crisis in Europe was sparked in 2021 as the region emerged from a prolonged cold winter with depleted natural gas storage reserves. Apprehensions regarding tight supplies escalated as Russia began reducing gas exports to Europe, prompting speculation among traders that it was a strategic maneuver to exert pressure on European governments, notably Germany, regarding the contentious Nord Stream 2 gas pipeline project.

European gas prices reached a zenith in the summer of 2022, soaring to over €300/MWh, as Russia further constricted its supplies to the region in the wake of its incursion into Ukraine and the politicization of its abundant gas resources.

Subsequent collaborative efforts by EU member states to curtail demand, coupled with substantial LNG imports from countries such as the United States and consecutive mild winters, have contributed to alleviating Europe’s gas supply strain.

Natasha Fielding, Head of European Gas Pricing at Argus Media, remarked, “Europe has already withstood its most severe trial, which occurred immediately after the abrupt loss of the majority of its Russian gas.”

Piped Russian gas, which previously constituted 40% of the EU’s supplies, has dwindled to 8%, according to the European Commission. As of Wednesday, EU gas storage facilities were over 64% full, marking a record high for this time of the year, according to data from Gas Infrastructure Europe.

However, the transition from dependency on piped gas from Russia to reliance on LNG shipments via sea routes, predominantly from producers in the US and the Middle East, leaves Europe susceptible to potential future price surges, cautioned Fielding.

“Europe must vie with Asia for its LNG supplies, and we have yet to witness how this dynamic would unfold in a rare cold weather event affecting both demand centers simultaneously,” she added.

Tom Marzec-Manser, Head of Global Gas Analytics at ICIS, highlighted that until new LNG production capacities come online from Qatar and the US in 2026, global gas demand is expected to outpace supply.

“It is premature to declare the end of the energy crisis,” Marzec-Manser noted. “We still face a global disparity between gas supply and demand… so it will likely be after the upcoming winter that we can confidently assert that the extreme volatility of recent years has genuinely abated.”