The warming weather, combined with the prospects for a peace plan in Ukraine, has led to a new 18-month low in European natural gas prices.

Recent weather forecasts showing warmer temperatures and traders weighing the prospects of a peace plan in Ukraine have pushed European natural gas futures prices to their lowest level in 18 months. The expected rise in temperatures implies a weakening in heating demand, causing benchmark futures prices to drop to their lowest point since May 2024. Against the backdrop of continued ample natural gas supply and new developments in Ukraine-related diplomatic negotiations, the market has broken out of its narrow trading range of the past few weeks. Ukraine announced on Thursday that it has agreed to consider a peace plan brokered by the United States and Russia. Traders are closely monitoring the situation - although there is currently a high level of uncertainty, reaching a peace agreement with Russia could potentially ease sanctions on Russia. Russia used to be the largest natural gas supplier to the EU, but now its natural gas only accounts for about 10% of the EU's fuel imports. However, increased energy exports from Russia to the global market (including oil) could put downward pressure on prices. "The end of the war may mean that the EU will not impose a ban on natural gas supply from Russia, improving Europe's natural gas supply situation beyond previous expectations," said Tom Marzec-Manser, head of European natural gas and LNG at Wood Mackenzie. Although European natural gas stocks are below historical averages, traders are increasingly confident in Europe's ability to weather the winter with ample global LNG supply. However, the market remains fragile during the heating season, as any significant changes in demand or supply could trigger large price fluctuations. The latest weather models show that temperatures in northwestern and central Europe will warm up in the coming days, bringing relief to the market after the recent cold snap pushed up natural gas demand and accelerated inventory withdrawals. Meteorologist Matthew Dross from Vaisala said that temperatures in early December are "expected to continue to be warmer than previously anticipated." As of the time of writing, the European natural gas benchmark Dutch TTF futures prices have dropped by 0.88%, to 30.43 euros per megawatt-hour.