Benchmark futures fell as much as 18%, and are about 70% lower from the highs of August. High temperatures are expected to remain into next month, delaying the heating season and allowing storage sites to continue to be filled. The fuller-than-usual reserves would provide the buffer needed for when the weather inevitably turns cold. 

The improved conditions are easing some pressure on Europe’s policy makers, with the energy crisis helping push the economy to the brink of recession and inflation to the highest level in decades. Despite the recent dip, prices remain about three times higher than the five-year average for the time of the year, and cold snap could quickly renew supply concerns.

“Europe is in a comfortable place concerning supplies now,” said Graham Freedman, an analyst at consultancy Wood Mackenzie. “The risks of blackouts and rationing are receding. But the real test will be when we have cold weather.”

European Union leaders last week agreed to back urgent measures, including supporting a cap on the price of gas in electricity generation and steps to avoid extreme spikes. The bloc’s energy ministers will meet this week to continue to hash out the details. 

There are increased calls from member states for more action to protect the economy from high costs, even as the International Monetary Fund warned over the weekend of a “toxic mix” of rapid inflation and flagging growth in the region.    

Dutch front-month gas futures, the European benchmark, was 14% lower at €97.25 a megawatt-hour as of 3:38 p.m. in Amsterdam. The UK front-month gas contract fell 14%, while German power for next year dropped as much as 4.5%.

Navigate Winter 

The high storage levels and imports to replace some of the lost Russian supplies will likely be enough to “navigate a normal winter,” Bloomberg Intelligence analyst Patricia Alvarez wrote in a note. “But curbing demand remains key in mitigating the impact of further Russian gas cuts.”

Pipeline shipments from Moscow have plunged to just about 20% of what they used to be before the war in Ukraine and subsequent sanctions on Russia. The loss of those volumes would make it harder for Europe to replenish crucial reservoirs at the end of winter, potentially making next year difficult as well.

But German Economy Minister Robert Habeck told Handelsblatt that the country would be in a much better position next winter than this one as more LNG flows in. Supplies from places including Norway and the Netherlands should make up about one-third of lost flows of the shut Nord Stream 1 pipeline that carried Russian gas.