Cold snap depletes EU's gas supplies
Depleting European Fastest The 2021 Rate Gas Inventories At Since Are
European gas inventories are falling at the fastest pace since 2021 as freezing temperatures across much of Europe drive up demand for heating.
In Ireland, Met Éireann has issued a yellow low temperature and ice warning for the entire country with temperatures potentially dropping as low as -5C. The warning will remain in place until 11am on Friday.
The UK is bracing for snow and ice over the next few days, while Nordic countries also face freezing temperatures.
The cold snap across the north of the region heralds a colder-than-usual January, boosting energy demand as gas storages deplete. The sub-zero temperatures also coincide with the end of the Ukraine-Russia pipeline transit deal, leaving the region without a key source of gas supply.
On Thursday, benchmark gas prices rose to the highest since October 2023, before erasing most of the advance. Russian gas deliveries across Ukraine halted on New Year’s Day after a transit contract between the two warring nations expired, with no alternative in place.
Traders had been expecting the loss of Russian flows — an important source of supply for several central European countries — and are now watching to see whether the stoppage will trigger quicker withdrawals from storage.
In Slovakia, one of the nation's worst hit by the cutoff, the mercury may sink as low as minus 7C (19F) by mid-January.
Still, the European Commission said there is no threat to security of supply in central and eastern Europe.
“Thanks to efficient preparatory work and coordination in the region and beyond, there are no security or supply concerns,” the European Union’s executive arm said on its website.
“Gas supplies have been secured via alternative routes (Germany, Italy) and through withdrawals from storage.”
While Europe is unlikely to run out of gas this winter, thanks to inventories and deliveries from other suppliers, traders may find it harder to refill storage for the next heating season. Gas prices for next summer recently surged above those for winter 2025-26, which will make it more costly to restock.
Russian piped flows to Europe now only have one route: a conduit crossing Turkey that sends the fuel to Hungary. Deliveries on that link will be closely monitored.
Most central European customers of Russia’s Gazprom PJSC have managed to source alternative supplies. Austria is receiving more gas via Germany and Italy, according to a report from Austria Gas Grid Management.
Europe will also likely deepen its reliance on liquefied natural gas, including from Russia. The country shipped record volumes of LNG to the region last year, making it the largest supplier after the US, which has recently started up two new export plants.
Europe as a whole will need to compete harder for LNG this year, especially in the summer when energy demand for air conditioning soars in Asia. While several new LNG plants are under construction worldwide, meaningful capacity additions won’t be ready for another couple of years.
For Europeans, that means higher energy bills for longer, with wholesale prices for 2025 seen exceeding average rates last year.
Benchmark gas for February delivery in the Netherlands climbed as much as 4.3%, before trading 1.9% higher at €49.83 a megawatt-hour. Futures topped €50 on December 31 in anticipation of the halt in flows.
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