Russia-Ukraine talks in addition to warm winter assistance, Europe summer natural gas futures premium significantly reduced.

With the warming optimism about supply prospects and progress in negotiations to end the Russia-Ukraine conflict, European natural gas prices for summer deliveries this year have finally approached prices for next winter - the premium gradually approaching zero. The seasonal price spread, which has been closely watched over the past few months, fell below 1 euro per megawatt-hour for the first time since November last year. Prices for summer deliveries in 2026 are now slightly lower than those for the winter of that year, marking a return to normalcy in the market after the turmoil earlier in the year. This indicator has been of recent concern due to the rising summer fuel prices, making it uneconomical to replenish stocks for the next heating season - a critical point as natural gas inventories have dropped to their lowest levels since 2022. These concerns even pushed near-term natural gas futures to a two-year high earlier this month, sparking worries about a new energy crisis in Europe. Since then, natural gas prices have dropped significantly due to US efforts to end the Russia-Ukraine conflict, EU negotiations on relaxing storage rules, and mild weather across the European continent. On Wednesday, benchmark futures plummeted by 4.7%, falling to the lowest intraday level since December last year, after Ukraine reached an agreement with the US to jointly develop its natural resources. This could advance Trump's goal of a ceasefire with Russia. Recent price fluctuations have also been exacerbated by traders adjusting their positions. Investment funds have been reducing bullish bets on European natural gas - potentially intensifying recent selling after European gas prices neared record highs earlier this month. Carsten Poppinga, Chief Commercial Officer of Uniper SE in Germany, said this week that normalizing price differentials is a relief for the industry. The market does not need "volatile natural gas prices". However, concerns remain over inventory issues for this summer due to ongoing tight global supply. Any peace agreement may take months to finalize, and it is unclear if lost Russian supplies will quickly return to the European market. Furthermore, according to EnergyScan from Engie SA, the price drop may lead to a rebound in Asian liquefied natural gas imports. This suggests that the "likelihood of further price declines seems increasingly limited," analysts wrote in a report.