STORY: European benchmark gas prices have been steadily declining over the past few months…

to near their levels before Russia’s invasion of Ukraine in late February.

Here’s why.

WHY HAVE EUROPEAN GAS PRICES BEEN FALLING?

The continent has been facing an energy supply squeeze this year as Russia has cut gas flows after the West imposed sanctions in response to the war.

Despite dwindling Russian supplies, Dutch front-month gas – the European benchmark – has fallen 67% since hitting an all-time high in August.

Now around 100 euros per megawatt hour, it’s at the lowest level since mid-June.

The price is still 12.6% higher than this time last year.

Heating demand typically rises in early October, but Europe has experienced milder weather than usual, which has helped dampen demand.

The European Union as a whole also met a target for refilling gas storage sites to 80% by November 1st ahead of time.

Storage facilities are currently 93% full, compared with 77% this time last year, Gas Infrastructure Europe data shows.

Liquefied natural gas supply – or LNG – and Norwegian pipeline supply have been strong.

Added to that, wind power output has been quite high, which reduces demand for gas from power plants.

Agreement among EU countries to cooperate on reducing prices and consumption have also contributed.

WILL WEAKER PRICES BE SUSTAINED?

Much depends on the weather and the impact on demand.

Longer-term, forecasts indicate that much of Europe will have milder-than-normal temperatures this winter.

Factors such as potential higher demand for LNG from Asia during the winter, and any delays due to outages, could affect prices.

DOES THIS MEAN LOWER PRICES FOR HOUSEHOLDS AND INDUSTRY?

Lower wholesale prices do not immediately translate into lower retail prices for consumers.

Energy suppliers hedge, or buy in advance, the power they need for customers, typically around six months ahead…

meaning rises or falls in the wholesale market take time to filter through to people's bills.

In response to high energy prices, several industries which rely on gas as a feedstock, such as fertilizers, ceramics, glass and cement, have reduced production this year.