Putin's energy weapon is looking punier and punier
European natural gas prices have collapsed dramatically.
Why it matters: The decline in prices shows that with a bit of luck, and a global scramble for supplies from sources like the U.S. and the United Arab Emirates, Europe has found a way to live without Russian gas.
- Prior to Russia's invasion of Ukraine last year, Moscow's status as the main supplier of natural gas was seen as a major source of leverage that would prevent unified pushback.
By the numbers: Benchmark prices are down nearly 90% from the peak of nearly €350 per megawatt hour in late August.
- That's even though Russia cut off gas flows to Europe via its Nordstream 1 pipeline the following month.
- The reason: A combination of warm weather and surging global stockpiles.
Yes, but: European gas is still quite expensive compared to just a few years ago.
- In 2019, it averaged €15 per megawatt hour, about a third as much as today.
What they're saying: "Concern around Europe’s ability to survive a cold winter in the absence of Russian pipeline gas helped drive [European benchmark prices] to unthinkable levels during the summer of 2022, but winter weather in the region turned out to be rather mild," Bank of America analysts wrote in a note published Tuesday.
Bottom line: With ballooning European stockpiles, BofA analysts expect gas prices to grind lower at least until next winter, which, if it's a cold one, could prompt a rapid drawdown of those reserves.