Bloomberg reported that gas prices in Europe have increased for the past four consecutive days, increasing by more than 10%. The main reason is supply concerns when the gas transit contract between Russia and Ukraine expires on December 31, 2024.
The volatility comes as gas demand is expected to surge due to colder weather, exacerbating a situation where storage is depleted faster than usual.
The gas transit contract between Russia and Ukraine, which plays a key role in the European gas supply chain, is coming to an end. Ukrainian President Volodymyr Zelensky affirmed that Ukraine will not allow the transit of Russian gas if it brings financial benefits to the Kremlin amid the ongoing Russia-Ukraine conflict.
This is particularly worrying for countries like Slovakia, which are heavily dependent on gas flows through Ukraine and are looking for alternatives to avoid the severe financial impact of supply disruptions.
Although Europe has been trying to reduce its dependence on Russian gas, many countries still rely on it. If transit flows are completely stopped, demand for liquefied natural gas (LNG) could surge, increasing competition with Asian countries, especially as global LNG expansion projects are delayed.
Meanwhile, data from Gas Infrastructure Europe showed that European Union (EU) gas stocks fell by about 19% from late September to mid-December, higher than the usual decline due to colder weather and lower LNG imports.
Natasha Fielding, an expert at Argus Media, commented that the EU's current reserve level is around 75% of capacity, slightly above the 10-year average but significantly lower than the nearly 90% level at the same time last year.
With gas reserves rapidly depleting, replenishing them next year could prove more difficult and costly. Although gas prices are now down 90% from their peak in the summer of 2022, Europe is under intense pressure to meet the European Commission’s target of filling its reserves 90% by November.
