Gas prices in Europe rose to their highest level since October 2023, before erasing most of their gains, as the Old Continent prepares for freezing winter temperatures without a main source of supply.
Russian gas deliveries through Ukraine stopped on New Year’s Day after the expiration of the transit contract between the two warring countries, with no alternative available.
Traders had been anticipating a loss of Russian flows and are now watching to see if the halt will lead to faster withdrawals from European stocks.
Prices
The standard gas price for delivery in February in the Netherlands rose by about 4.3%, before losing some of its gains and settling for a rise of only 1.84% at 49,810 euros ($51.45) per megawatt-hour in the latest trading in Amsterdam.
Futures surpassed 50 euros ($51.64) on December 31 in anticipation of a halt in flows.
Stockpiles across the continent are already declining at the fastest pace since 2021, while the gas crisis began at the beginning of the new year, according to Bloomberg.
The halt coincides with expectations of sub-zero temperatures in some countries, which will increase demand for heating. In Slovakia, one of the countries most affected by supply cuts, temperatures could drop to minus 7 degrees Celsius (19 degrees Fahrenheit) by mid-January.
While Europe is unlikely to run out of gas this winter, thanks to stocks and deliveries from other suppliers, traders may find it more difficult to refill storage for next winter season, and gas prices for next summer have recently risen above winter 2025-2026 prices, and that will make Restocking is more expensive.
Increased risk
Arne Lohmann Rasmussen, chief analyst at Global Risk Management in the Danish capital, Copenhagen, said: “There is an increasing risk that the European Union will emerge from the winter with low gas storage levels, which makes replenishing them expensive.”
Now, Russian gas flows into Europe only through the TurkStream pipeline, and deliveries through it will be closely monitored.
Most of Russia’s Gazprom customers in central Europe have been able to obtain alternative supplies, and Austria receives more gas via Germany and Italy, according to a report issued by the Austrian Gas Network’s management.
Europe is likely to increase its reliance on liquefied natural gas, including from Russia; The country shipped record amounts of liquefied natural gas to the region last year, making it the largest supplier after the United States, which recently started operating two new export plants.
However, in landlocked countries, in Central and Eastern Europe, the cost of delivery by sea to Germany, Poland or Greece, and subsequent regasification and onward transit make LNG an expensive option.
Slovakia estimated that gas imports from the West would result in additional costs of 177 million euros ($183 million).
According to Bloomberg, Europe needs to compete more strongly for liquefied natural gas this year, especially in the summer when demand for energy for air conditioning rises in Asia. While many new LNG plants are being built around the world, large-capacity additions will not be ready for another few years.
For Europeans, this means higher energy bills for longer, as wholesale prices for 2025 are expected to exceed last year’s average rates.
