The global energy landscape has entered a transformative era as Europe decisively shifts away from Russian natural gas. Once the cornerstone of Europe’s energy supply, Russia now faces the economic and geopolitical fallout of losing its largest market.
With European inventories depleting fast and now sitting below the five-year average for this point during the winter season, Europe will need to boost overseas supply not only for this winter’s consumption, but also in the spring and summer, to fill up storage sites ahead of the 2025/2026 winter.
Unsurprisingly, the cessation of Russian gas via Ukraine has pushed prices for natural gas higher across Europe. The Dutch TTF gas hub’s front-month contract reached a ten-month high of €42.57 per megawatt-hour, reflecting market jitters. Traders are also paying a record premium for European gas for the upcoming summer, a reversal of the usual pricing trend where summer gas is cheaper. This suggests there are significant concerns about the challenges in restocking during the summer of 2025.
Even as Russian troops and tanks moved into Ukraine in February 2022, Russian natural gas kept flowing through the country’s pipeline network — set up when Ukraine and Russia were both part of the Soviet Union — to Europe, under a five-year agreement.
European countries are ramping up sanctions pressure on Russia as they look to reduce Vladimir Putin’s oil revenues that fund the war in Ukraine.
Russia halted gas supplies to Austria’s OMV (OMVV.VI), opens new tab in mid-November amid a contractual dispute and legal wranglings related to interrupted gas supplies in 2022.
Despite the stoppage, overall Russian gas exports via Ukraine, which account for just under half of Moscow’s total gas flows to the continent, have remained stable as other buyers stepped in.
Dropping temperatures in the United States and Europe have prompted a rally in U.S. natural gas prices. Although somewhat hesitant, this rally could help avoid a shortage in the not-too-distant future.
Europe is depleting its natural gas reserves at the fastest rate in six years as still winter weather and low temperatures combine to challenge the continent’s transition away from hydrocarbons—and delay it.
Europe’s gas inventories have depleted at the fastest rate for eight years, as the region has experienced repeated bouts of colder-than-normal temperatures and low wind speeds since the start of the winter heating season.
Russia halted supply to Vienna-based energy company OMV over contractual dispute in mid-November, but overall gas exports to Austria have remained stable as other companies have stepped up their purchases.