The overall energy situation in Europe remains positive heading into the upcoming 2024-25 winter season on the back of high gas stores and lower energy prices. Improved supply fundamentals and two consecutive mild winters have helped the EU reach its 90% winter gas storage target on August 19, well ahead of the November 1 deadline. European countries have also continued to reduce their reliance on Russian energy with the continent’s share of Russian gas and LNG declining to only 18% in H1 2024 compared to 45% in 2021, a drop of around 124.8 billion cubic meters (bcm). Both the U.S. and Norway have since emerged as Europe’s biggest suppliers of pipeline gas and LNG respectively, supplying 34% and 18% of the EU’s total gas imports in H1 2024.
European gas prices are also holding steady at pre-crisis levels heading into November, with gas prices on the TTF neutral index largely staying between €30-40/MWh from August to October – almost ten times lower than peak crisis prices of over €300/MWh. However, the bloc’s reliance on energy imports will continue to expose European consumers to fluctuations in gas prices based on overseas LNG demand and other supply risks. For example, TTF month-ahead prices in August rose to their highest levels since December 2023 after a Ukrainian offensive into Russia’s Kursk region led to fighting near the Sudzha gas transit station. Gas prices also reached above €40/MWh in the first week of October as markets reacted to heightened geopolitical tensions in the Middle East, La Niña weather forecasts, the potential expiry of Russian pipe flows to Europe, and a broader commodity price rally.
Ukraine suspends pipeline agreement with Russia
One disruption that could raise gas prices this winter involves the upcoming expiration of a gas transit deal between Moscow and Kyiv on December 31 that would suspend Russian gas flows to Europe via Ukrainian pipeline networks. Russian gas exports via Ukraine currently account for between 4-5% of annual European gas demand and a suspension of the current transit agreement could cause a temporary rise in European gas prices.
EU officials have indicated that the bloc is ready to handle a potential cut-off of Russian transit gas but concerns remain that the supply disruption could disproportionately affect prices in Hungary, Slovakia, and Austria as Russian gas exports via Ukraine accounted for around 65% of total gas demand from these three countries in 2023. Austria has indicated that it should be able to increase gas imports from Germany and Italy in order to finally transition away from its reliance on Russian gas. However, the Hungarian and Slovakian governments have broken with the EU and are currently pushing Ukrainian authorities to extend the gas transit agreement. Both countries previously circumvented a Ukrainian ban on Russian oil transits via Belarus earlier this year after Hungarian oil and gas company MOL Group agreed to purchase ownership of Russian crude transiting via Ukraine and it is unclear if a similar agreement could be reached to allow Russian gas flows to continue.
EU introduces new curbs to reduce reliance on Russian LNG
Russia has also remained a key exporter of LNG to Europe in 2024. The country has emerged as the second largest source of European LNG imports in 2024 behind the U.S. despite the EU’s continued attempts to curb Russian energy imports. Russian LNG cargoes comprised around 16% of the EU’s LNG imports during the first six months of 2024, an 11% increase from the previous year.
The bloc’s continued dependence on Russian LNG has prompted EU officials to introduce new restrictions aimed at preventing re-exports of Russian LNG from European ports from March 2025 and barring European companies from providing LNG technologies and services to Russian firms. Additionally, EU energy ministers are also currently discussing increasing reporting requirements for local companies that import and store Russian LNG.
European gas storage levels exceed 95% capacity
Gas stores across the continent have exceeded 95% storage capacity as of October 18 and EU member states are expected to have enough gas to meet both industrial and consumer demand for the upcoming winter season. The EU’s efforts in reducing gas demand are also expected to help avert any potential energy shortages, with the bloc having achieved an 18% gas demand reduction between August 2022 and May 2024, successfully saving about 138 bcm of gas.
The EU is could also turn to increased electricity generation from renewable sources to help the bloc meet energy demand this winter. EU data indicates that the continent produced around 50% of electricity from renewables for the first time in H1 2024 with wind power overtaking gas to become the continent’s second largest source of electricity generation behind nuclear energy. The EU should also possess sufficient LNG liquefaction capacity to meet any additional gas demand in the upcoming winter as the bloc’s LNG import capacity has risen by 70 bcm in 2024 to a total of 284 bcm.
Mild winter anticipated for 2024-25 winter season
Europe is likely to face another mild winter season based on recent winter temperature trends, warm ocean waters surrounding Europe, an anticipated stable polar vortex (PV) to begin winter, and La Nina conditions. Recent winters in Europe have been milder than normal with warmer than average winters recorded since 2017. The strong pattern in Europe’s warmer winters is being driven by the increasing trend in ocean waters, which continue to be at some of the warmest levels on record.
Looking ahead, the upcoming winter’s weather pattern will be influenced by two primary factors: the polar vortex (PV) and La Niña. La Niña, characterized by cooler-than-normal sea surface temperatures in the equatorial Pacific Ocean, plays a significant role in shaping global weather patterns. However, the relationship between La Niña and weather patterns in Europe is more complex and La Niña winters have varied from cold (2010-11 and 2011-12) to warm (2022-23 and 2021-22).
The polar vortex (PV) is expected to be a bigger driver of winter temperatures compared La Niña and the magnitude of warmth will be dictated by the PV during the winter. The winter PV exists in two states: stable and unstable. Warmer-than-normal temperatures in Europe are typically associated with stable states, while colder-than-normal temperatures are linked to unstable states. As we enter the early winter season, specifically November and December, the PV is projected to be stronger than usual and more stable, signaling warmer conditions in Europe and Arctic air bottled up in the Arctic.
The initial outlook for temperatures during the upcoming winter in Europe is for a warmer than normal winter across the Continent. This is especially the case during the early part of the winter (November – December) due to the stable PV. Any significant cold later in winter will likely be short-term in duration and not intense. All in all, indications are that the warm trend of late will continue and European heating demand is once again expected to be less than normal during the prime winter months.
Everstream clients are receiving more detailed insights and recommendations about this risk.
Don’t miss key supply chain risk updates! Subscribe now to get supply chain news, weather updates, forecasts, and other insights.