European prices have increased today (2.1.2025), i.e. on the first trading day of the year, as the region is preparing for cold winter temperatures without a basic source of supply and the flow of gas through Ukraine has stopped since yesterday. The reference values for the first month increased by 4.3% to 51 euros per megawatt hour, the highest level since October 2023. Russian gas deliveries to Ukraine stopped yesterday New Year after the end of the transit contract between the two opposing nations (Russia – Ukraine), without any alternative. CORVERSE Traders are monitoring to see if the loss of Russian flows – an important source of supply for several central European states – will cause faster withdrawals from storage. Stocks across the continent are already declining at the fastest rate since 2021, when the gas crisis broke out. The interruption coincides with forecast for temperatures below zero in some countries, which will increase heating demand. In Slovakia, one of the states most affected by the interruption, mercury can fall to -7 degrees Celsius 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 difficult to fill the warehouses for the next heating season. Gas prices for next summer have recently increased over those of winter 2025 – 2026, which will make the renewal of stocks more expensive. CORVERSE “There is an increasing risk that the EU will come out of the winter with low levels of gas storage, making their replenishment accurate,” said Arne Lohmann Rasmussen, Global Risk Management’s chief analyst in Copenhagen. Russian pipeline flows to Europe now have only one route – a pipeline that crosses Turkey and sends the fuel to Hungary. Traditions in this connection will be closely monitored. With the loss of flows through Ukraine, Europe will also increase its dependence on liquefied natural gas (LNG), including Russia. The country sent last year’s LNG record quantities to the region, which makes it the largest supplier after the US, which recently launched two new export factories. However, for the nations of central and eastern Europe without land borders, the cost of maritime delivery in Germany, Poland or Greece, subsequent re-limitation and further transit makes LNG a costly option. Slovakia estimated that imports of natural gas from the West would lead to an additional cost of 177m euros (183m dollars). “The gas markets in Europe are by no means insufficient,” but the transport of fuel from the west to the east is “somewhat limited, so that this leads to an increase for the region,” said Walter Boltz, a former Austrian regulator, who is now a senior energy consultant to Baker & McKenzie LLP. Europe as a whole should compete more for LNG this year, especially in summer, when demand for energy for air conditioning is rising in Asia. While several new liquefied natural gas plants are under construction worldwide, substantial capacity additions will not be ready for two more years. Reference gas for delivery February in the Netherlands increased by 3.1% to 50.39 euros per megawatt hour by 8:10 a.m. in Amsterdam. Future fulfillment contracts also exceeded 50 euros on December 31st pending the interruption of flows.
Gas prices increase after Russia freezes the flow
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