European natural gas prices remain range-bound at the end of the year, with a 40% drop over the year marking the largest decline in three years.

European natural gas futures prices have been range-bound since the beginning of the month, with traders weighing strong supply against the impact of cold weather, leading to price stabilization. Natural gas prices are hovering around 28 euros per megawatt hour, expected to drop by about 40% by the end of the year, marking the largest annual decline since 2023. Previously, the market had anticipated a severe winter challenge due to fuel inventories being below normal levels, but the current trend is in stark contrast to those expectations. As of the time of writing, the Netherlands' February delivery natural gas futures prices, which serve as the European benchmark, have risen by 1.1% to 27.84 euros per megawatt hour. The start of the heating season has been relatively mild, with stable supply of Norwegian natural gas and an increase in liquefied natural gas imports, easing market pressure and indicating significant progress in the market since the energy crisis four years ago. According to the International Energy Agency, European liquefied natural gas imports are expected to reach a historic high this year. Trading volume was light on the Wednesday before the New Year holiday. In terms of weather, some parts of Europe have seen a drop in temperature forecasts for mid-January, with models showing temperatures in Northwest Europe remaining below normal levels. Natural gas inventories have fallen to 63%, compared to the five-year average seasonal inventory level of 74%. Electricity issues continue to impact natural gas transportation.