Natural Gas Prices in Europe Fall to Pre-Invasion Levels

European natural gas prices, which soared last year after Russia’s invasion of Ukraine, have now fallen well below their levels before the start of the war, reflecting the continent’s success rounding up alternatives to Russian gas, widespread conservation efforts and a relatively mild winter.

But the news comes as Europe’s economy is slowing — half the European Union is expected to be in recession this year, the head of the International Monetary Fund, Kristalina Georgieva, said Sunday — and the slumping gas price also signals diminished demand for energy.

On Tuesday, the wholesale price for European natural gas, measured by the benchmark Dutch T.T.F. futures contract for February, was selling for around 76 euros a megawatt-hour. On the eve of Russia’s push into its neighbor last February, the contract sold for about €88.

This is a remarkable turnaround. Just months ago, as Russia curtailed and eventually cut off most exports of the fuel to Europe, there were intense fears that the continent would run out of gas this winter. That pushed prices to an August peak of more than €340 a megawatt-hour, about five times current levels.

Those concerns have largely faded, even though Russia used to provide about 40 percent of Europe’s consumption of gas, which is widely used to heat homes, run businesses and generate electricity.

“We now have a well-supplied E.U. gas market, even without Russian gas,” said Henning Gloystein, the director for energy, climate and resources at Eurasia Group, a political risk firm. “That’s reflected in current prices,” he added.

The shift from worry to something approaching confidence reflects a combination of quick steps by both the European Union and governments in countries like Germany to promote conservation of gas and secure supplies from other sources.

Europe has also had good luck in the form of mostly balmy weather during the winter, when gas consumption soars.

After the invasion, Europe moved quickly to secure shipments of liquefied natural gas from the United States, Qatar and other exporters. Europe also rapidly built terminals to receive liquefied gas, sweeping away many of the usual bureaucratic obstacles and environmental objections.

On Tuesday, one of these facilities, at Wilhelmshaven in northwest Germany, received its first full L.N.G. shipment, a cargo from the United States. The Netherlands has already started a new terminal at Eemshaven, in the northern part of the country. These are part of a wave of investment in new gas-receiving facilities by European governments and companies.

Along with acquiring new sources of supplies, both European industry and consumers have cut gas consumption by roughly 20 percent, responding to a combination of high prices and government urging.

These major shifts on both the supply and demand side mean that gas storage facilities, filled to near capacity in the fall, are still quite high; in early January, facilities across the European Union were averaging 84 percent full, compared with 52 percent a year ago. A daily tally of gas reserves showed that on Sunday many countries added more gas to their storage facilities rather than drew down the fuel.

Having sufficient gas in storage to help meet the heavy demands of winter is often key to determining natural gas prices. Analysts also say Europe may wind up the winter with high enough storage levels that the heavy buying of last fall that kept prices exorbitantly high may not be necessary.

“It’s a lot better than many people feared, and it could mean that prices will be lower this year than in 2022,” said Massimo Di Odoardo, the vice president for gas research at Wood Mackenzie, a consulting firm.

There is still reason for concern about energy prices in Europe. While Europe’s gas prices have fallen sharply from their recent peaks, they remain historically high and are still steep enough to make it difficult for industries that consume a lot of energy, like steel and glass, to compete with rivals in other regions or even remain open.

The benchmark price of gas remains nearly five times what it was two years ago, and roughly five times the cost of natural gas in the United States.

The markets for other sources of energy remain uncertain. The European Union last month began an embargo on Russian oil, and in February that ban extends to Russian oil products, a move that is expected to drive up prices of diesel fuel, which is critical in the transportation industry.

And the fall in wholesale gas prices will not bring immediate relief for consumers and businesses facing high energy bills. Because utilities buy their natural gas supplies in advance through hedging programs, it may take months for the lower prices, if they persist, to work their way through to users’ bills.

Energy prices have been a primary reason that inflation across Europe jumped last year, reaching the highest levels in more than 40 years in many countries.