Gas prices fall to pre-war levels as demand pressure eases

European natural gas has extended its decline to its lowest level since the start of Russia’s war in Ukraine amid warmer weather and signs from the Kremlin that payment for the fuel in rubles is not yet expected.

Enchmark’s Dutch gas futures fell as much as 12 percent to €84 per megawatt-hour – the lowest level since February 23, the day before the Russian invasion – before recouping some of those losses. The front month contract was down 9.2 percent on April 14 ahead of the Easter holidays.

The market has focused on supplies from Russia, its largest supplier, particularly after President Vladimir Putin’s demand last month that “unfriendly” buyers should pay for gas in rubles. European Union lawyers have written a preliminary finding that the payment mechanism would violate the bloc’s sanctions.

Europe still has “some time” to pay for Russian gas supplies in rubles, with payments for April supplies mainly “due sometime in May,” Kremlin spokesman Dmitry Peskov said yesterday. He declined to comment on whether customers have agreed to pay in rubles or set up accounts as required.

Above-average temperatures in south-eastern Europe will spread to the central continent next week, Maxar said in a report. That could relieve demand for natural gas somewhat. Iberia will be colder than normal, the meteorologist added.

Even before the war in Ukraine, Europe was struggling with energy shortages and was competing with Asia for shipments of liquefied natural gas. Pandemic-related lockdowns are now weighing on demand in Asia.

“Gas prices have come down quite a bit as near-term fundamentals are weakening,” said Edmund Siau, senior gas and LNG analyst at consultancy FGE. Demand destruction and fuel switching have eased pressure on European gas prices, but competition from Asia looms, he said. “Traders are wondering what Asia will do with China’s lockdowns and what the plan is to stock up ahead of winter.”