Wholesale gas prices fall 5% as worst of crisis recedes       

Prices have plunged more than 80% from their August peak.

Wholesale European gas prices fell sharply below €50 a megawatt-hour for the first time in 17 months as the worst energy crisis in decades recedes, but with signs that further price declines are unlikely.

Prices have plunged by more than 80% from their August peak when Russia’s gas cuts hammered Europe's economy and pushed inflation to the highest in decades. Now, the continent is seeing a sharp turnaround as relatively mild weather, efforts to reduce energy consumption and strong inflows of liquefied natural gas, or LNG, from suppliers including the US and Qatar. 

Prices for delivery in March fell by 6% to €48.90 per maegawatt-hour late Friday, according to futures markets. That compares with the record price  of €338 in late August when it appeared that end of vast supplies of cheap gas from Russia would lead to the lights going off this winter in Europe. 

However, prices for delivery over the summer months are trading higher at €50 per megawatt-hour and analysts question whether the decline in prices will persist much further. 

With the end of winter approaching and heating demand receding, lower prices could make gas more economical for power generation in Europe than alternatives such as coal.

“Gas prices have fallen into the fuel-switching range suggesting that it is now more profitable to run the highest efficiency gas plants in comparison to the lowest efficiency coal plants,” said Stefan Ulrich, an analyst at Bloomberg.

“We’re getting to a level where the downside is probably more limited whereas still there’s clearly upside, particularly if you get the strong economic growth in China,” said Steve Hill, executive vice president for energy marketing at Shell. 

Bloomberg and Irish Examiner