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Europe is suddenly faced with a glut of natural gas, driving down prices and easing fears of winter fuel shortages and rationing as the continent weans away from Russian energy.

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Just a few months ago, officials, policy makers and analysts worried that as Europe withdrew Russian gas after Moscow’s invasion of Ukraine and Russia restricted exports in response to sanctions, the continent would run out of fuel for the winter.

They urged consumers and businesses to conserve fuel, warned of mandatory rationing if they didn’t, and bought massive amounts of gas supplies from places like the US and Qatar.

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These measures – combined with recent unseasonably warm weather – have resulted in huge reserves of gas being stored in onshore storage facilities and in tankers sailing close to the coast.

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“The offer is good,” said Roland Harings, chief executive of Aurubis AG, Europe’s largest copper producer and major energy consumer. “We haven’t gone through this yet. I’m not saying it’s over now. But it looks much better than it did two months ago.”

Dozens of liquefied natural gas tankers sail the high seas in European ports. While storage space and berths capable of handling supercooled cargo are in short supply, some traders are keeping their gas on board ship, hoping lower prices will improve before they are offloaded, highlighting the sharp turn in the markets.

Benchmark wholesale gas futures are down more than a tenth this week to €100, about the same in dollars per MWh. This extended last week’s decline and reflected the recent pullback in the US, which is also weather related.

The comfortable position in which Europe finds itself may be temporary. From next week, seasonal forecasts will be able to show with some accuracy how winter weather will affect storage. Cold, dry and windless winters can deplete gas reserves and hinder wind power generation. A mild, wet and windy winter can help reduce gas demand and increase wind power.

wind turbines

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Meanwhile, a cold snap in Asia could prompt traders to divert gas from offshore Europe to China, Japan or South Korea.

Another risk is that the gas infrastructure sometimes breaks down or needs to be repaired, which can cause some of Europe’s surplus gas to be overused or make it difficult to reach consumers. Sabotage also poses a risk after Western investigators ruled that recent explosions along the Nord Stream gas pipeline linking Russia and Europe were deliberate acts.

However, European prices have fallen more than 70% from their all-time high at the end of August. They have fallen to levels last seen in June, when Russia cut supplies in what European governments have described as an economic war running parallel to the invasion of Ukraine. Moscow claims to be a reliable supplier and blames the disruption on sanctions.

Mural of the Nord Stream

Today’s warm weather is pushing back the date Europe will plunge into overflowing gas storage to heat homes and offices. Temperatures in Paris will hit 23 degrees Celsius or 73.4 Fahrenheit on Thursday, according to the UK Met Office. That’s seven degrees Celsius above the average daily high in October and closer to August temperatures than typical fall conditions.

Large-scale attempts to cut off Russian gas supplies have also put the continent in a stronger position than feared when Moscow first cut exports. The European Union and national governments have mandated storage of gas, urging companies and consumers to reduce demand. Caves and reservoirs across the EU are 94% full.

Government officials and company executives took the price cuts with relief. Analysts say Europe is unlikely to face a dangerous gas shortage at the moment unless the winter is exceptionally cold or pipelines from non-Russian suppliers are severely damaged.

The fall in prices reflects, to some extent, the limited European gas infrastructure. If Europe had more storage space, or more terminals that could turn supercooled gas delivered in LNG tankers back into gas, traders could continue to haggle for gas to stock up for the winter. But as the stores close to filling up, finding a place for gas has become a challenge.

LNG tanker sets sail

Thus, traders sell expiring contracts to avoid delivery, driving down their price. Gas prices for same-day delivery in the Netherlands briefly fell into negative territory this week, echoing US oil’s plunge below $0 a barrel at the start of the COVID-19 pandemic.

Meanwhile, tankers are piling up off the coast of Spain and in the English Channel, waiting to unload their cargo as the continent sinks into storage and the bottleneck dissolves. Some traders are sending gas east via pipelines to Ukraine, which has spare storage facilities.

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Futures markets are pointing to higher prices in December, when colder weather is expected to boost demand and stores shrink. Governments, regulators and operators of electricity and gas networks, including Germany, have prepared plans to protect the most vulnerable energy consumers in the winter in case supplies run out, for example by shutting down power and shutting down non-priority industries.

Traders and officials expect next year to be more challenging. The gas contracts, which will be delivered until 2023, are trading well above the current price due to the problem Europe will face when filling storage facilities with little or no Russian gas. Russia still supplies a small amount of gas to Europe via Ukraine and Turkey, and a small amount of LNG.

Gas stove Nice France

“Europe has enough gas reserves to get through this winter, as long as it doesn’t get very, very cold,” said Nicolin Bromander, an analyst at Rystad Energy. “But the continent is not yet out of the woods: as Russian flows continue to decline, winter 2023 will be even harder.”

Even after cutting prices in Europe more than seven times higher than they were two years ago, before the market began to rise in 2021. High gas prices have taken a heavy toll on European industry and forced governments to commit hundreds of billions of dollars. euro to protect businesses and consumers in the winter.

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Data released this week by S&P Global showed German factories saw their biggest production cuts since the pandemic began this month, raising fears of a recession.

The EU is contemplating its next steps to increase supplies from outside Russia and quell volatility in energy markets. The bloc’s executive this month proposed capping gas prices in the event of insolvency and pushed companies to bid for gas from foreign suppliers. Member energy ministers are due to meet on November 24 to adopt the package.

“The good news is that the price of gas is falling,” Luxembourg Energy Minister Claude Turmes said on Tuesday.

Kim McCrael contributed to this article.