European gas prices rose on the first trading day of the new year as the region prepares for winter frosts without one of its key sources of supply. Writes UNN with reference to Bloomberg.
The benchmark gas price rose by 4.3% in January, reaching €51 per megawatt-hour, the highest level since October 2023. Russian gas supplies through Ukraine ceased after the expiration of the transit contract between the two countries, and there is no equivalent alternative to this route.
Traders are watching closely to see if the loss of Russian flows, which have been important for Central European countries, will lead to a faster depletion of gas storage reserves. Gas reserves in Europe are already declining at the fastest rate since 2021, when the gas crisis began. The situation is complicated by the forecast of sub-zero temperatures in a number of countries, which will increase demand for heating. In Slovakia, one of the countries most affected by the supply disruption, temperatures could drop to -7°C by mid-January.
Енергокриза в Молдові: що відомо01.01.25, 19:41
Although Europe is unlikely to be without gas this winter thanks to existing reserves and alternative supplies, traders are already experiencing difficulties with the prospect of replenishing storage before the next heating season. Gas prices for the summer have already exceeded those for the winter of 2025-26, which will make restocking more expensive and difficult.
“There is a growing risk that the EU will enter the (next - ed.) winter with low levels of gas storage, which will make replenishment expensive,” said Arne Lomann Rasmussen, principal analyst at Global Risk Management in Copenhagen.
Russian pipeline gas is currently supplied to Europe via only one route - through Turkey to Hungary. Deliveries via this route will be closely monitored.
With the cessation of flows through Ukraine, Europe will become even more dependent on liquefied natural gas (LNG), particularly from Russia. Last year, Russia shipped record volumes of LNG to Europe, becoming the second largest supplier after the United States, which recently launched two new export plants.
However, LNG remains a costly option for landlocked Central and Eastern European countries due to the costs of transportation to ports in Germany, Poland, or Greece, regasification, and further transit. Slovakia has estimated that importing gas from the west would cost an additional 177 million euros ($183 million). According to Walter Bolz, former Austrian regulator and current senior energy advisor at Baker&McKenzie LLP, “European gas markets are not in short supply, but transportation from west to east is limited, which will cause an additional markup for the region.
This year, Europe will have to compete more actively for LNG supplies, especially in the summer, when demand for electricity for air conditioning in Asia is growing. Although new LNG plants are being built around the world, a significant increase in capacity is expected only in a few years.
The benchmark price for gas for February delivery in the Netherlands increased by 3.1% to 50.39 euros per megawatt-hour as of 8:10 am in Amsterdam. Futures exceeded the 50 euro mark on December 31 amid expectations of a flow stoppage.
Recall
Ukraine stopped transiting Russian gas on January 1, 2025, ending decades of energy dependence. The move provoked mixed reactions in Europe: some countries supported the decision, citing the need to reduce Russia's influence, while others, such as Slovakia, expressed concern about the possible consequences for energy supplies.