Europe’s gas inventory levels have been decreasing at the fastest rate in eight years in recent months due to a combination of colder temperatures and reduced wind speeds. The EU’s gas storage levels currently stand at 60% of full capacity, compared to 75% at this time in 2024. After two consecutive mild winters, countries in Northwest Europe have experienced a colder-than-normal winter, which has increased heating demand and put pressure on gas reserves. Europe’s gas consumption from underground storage has exceeded 250 terawatt hours (TWh) between October 1 and December 31, which is well above the 10-year average of 165 terawatt hours.
The operator of the UK’s largest gas storage site warned in early January that the country’s storage levels are concerningly low, with less than a week’s worth of gas storage available. Altogether, the EU storage levels could drop to 35-40% of capacity by the end of the winter season. Cold temperatures during the January-March period could lead to a further drop in inventories, which is expected to be far lower than the 60% capacity of the previous year. Faster withdrawals will also make the task of fulfilling the official storage target of 90% capacity more difficult and expensive ahead of the next winter season. Nevertheless, European energy reserves are still ample and an energy crisis is not imminent.
The 2024-25 winter has turned cold and dry, boosting heating demand. This combined with the planned halt of Russian pipeline gas via Ukraine, increased global competition for LNG, and a so-called ‘dunkelflaute’ pushed gas prices to a 14-month high of over €50 per megawatt-hour (MWh) at the end of 2024. In 2025, Europe will have to out-compete other importing regions, especially Asian importers, to secure LNG cargo from afar, but it can expect to pay higher prices. These factors overall will keep European gas prices high in 2025, further affecting the region’s energy-intensive manufacturing sector. Europe’s anticipated energy demand is already increasing forward prices significantly. Currently, gas for delivery this spring and summer is trading at a premium of around €4/MWh, while summer gas was trading at a discount of €1/MWh a year ago.
Russia stops gas supply to Europe via Ukraine
European countries have continued to reduce their reliance on Russian energy supply, with the continent’s share of Russian gas and LNG declining to only 11% in 2024 compared to 45% in 2021. Russian natural gas exports via Ukraine to Central and Eastern Europe came to a halt on the first day of 2025, cutting off another 15 billion cubic meters (bcm) of annual Russian gas flows. Austria, Slovakia, and Moldova were among the most dependent buyers of Russian gas via Ukraine. Austria received 98% of its annual supply from Russia through Ukraine, while Slovakia imported around two-thirds of its demand through this route annually. Both countries have tried to put alternative supply sources in place. Austria secured energy supplies from Germany, Italy, and the Netherlands, and shifted to LNG sources, while Slovakia started buying supply from Azerbaijan and reached gas supply deals with Orlen S.A., BP p.l.c., Eni S.p.A., ExxonMobil Corporation, RWE AG, and Shell plc.
However, Russian gas imports to Europe are not declining in a straight line. Russia remained a key exporter of LNG to Europe through 2024. Russian LNG shipments to European countries surged by more than 23% year-on-year in 2024 to reach a record high of 21 bcm. France, Spain, Belgium, and the Netherlands were the main destinations of Russian LNG supply. Moreover, Russia will continue to supply natural gas to key European markets including Turkey, Hungary, and Serbia through the TurkStream pipeline, which runs from Russia to Turkey, and will be the only remaining pipeline for Russian supplies to Europe.
Moldova declares state of emergency after Russia halts gas supply
In December, Moldova declared a national state of emergency for two months starting on December 16 over the cut-off of Russian gas supplies. Russia’s state-owned energy company Gazprom subsequently suspended gas shipments to Moldova on January 1, 2025, triggering an energy crisis in parts of the country. The Russia-backed breakaway region of Transnistria has been experiencing daily rolling blackouts due to the supply halt. The region’s hot water and central heating have largely been shut down and non-agriculture industries have been forced to suspend production due to supply shortages.
The suspension also puts government-controlled regions of Moldova at risk of disruptions, because Transnistria is home to a major power plant, which used to be fuelled by Russian energy shipments, and provided a significant portion of electricity supply to the rest of the country. The Moldovan government has announced plans to start buying gas supplies from Romania and Ukraine to address the national emergency. Romania plans to supply around 62% of Moldova’s energy demand from January, while 30% of domestic needs will be met with local thermal plants and renewable energy sources. Moldova will also purchase supply from Ukraine’s nuclear energy operator Energoatom during off-peak hours, mainly at night when consumption is expected to be lower.
Mild winter in Europe likely to continue
With the first half of winter over, temperatures across Europe have been very mild so far. This follows a common trend in European winters over the last several years, which has lowered concerns of natural gas supply constraints due to cold weather.
Looking into the second half of winter Everstream Analytics’ meteorologists expect that warmer conditions will likely continue for most areas of Europe. A stronger than normal polar vortex is expected during much of February, which tends to prevent Arctic air intrusions into the mid-latitudes, including Europe. This can be visualized using our Polar Vortex Index (PVI). When the forecasted PVI values are near the bottom of the graphic (blue colors), it indicates that the PV will be strong and unlikely to deliver long-lasting Arctic air to Europe. That is not to say there will not be brief bouts of cold and winter weather, however, the first half of February is looking to come in warmer than normal across the bulk of Europe.
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