Europe can't say it wasn't warned this time. Almost three years into the war in Ukraine, EU members are once again looking anxiously at their fuel prices, underground storage tanks and the weather forecast to see if they can make it through winter without natural gas bought from Russia.
Ukraine's decision to end a transit deal with Moscow that expired on January 1 has exposed countries such as Austria and Slovakia who continued to rely on Russian gas after supplies were slashed in 2022. The EU has already eaten heavily into its winter supplies and Arctic air is set to bring a cold snap over northern Europe.
On 2025's first day of trading, benchmark prices rose to their highest since October 2023 before reversing most of their gains. “The market had apparently still not fully priced this in as hopes for some form of continuation had remained,” London Stock Exchange Group analyst Ulrich Weber said in a market note.
Governments are optimistic that the EU will have enough gas this winter, with the European Commission declaring on Thursday that it had “no security of supply concerns”. But Europe could head into summer with a lot more replenishing to do for 2025/26 – and potentially at higher prices in a tight market.
A single cold day can mean the EU dipping into its reserves to the tune of more than 9,500 gigawatt hours of storage, as it did during a freezing three-day streak last January. At that rate its current supplies would last fewer than 90 days, although in fact high storage levels last winter meant there was no surge in prices.
This year, EU gas storage on New Year's Day was at the lowest for three years after the bloc burnt through supplies in November and December much faster than in 2022 or 2023, data analysed by The National reveals. Austria said it had “done its homework” and was ready to import from Germany or Italy if necessary.
Forecasts by Norway's Rystad Energy say a request from Austria could mean Italy having to source more North African gas via Tunisia. Hungary is also tipped to face “large challenges” if Austria and Moldova cannot forward gas its way. It could look to Russian supplies via Turkey.
Slovakia was more irritated, accusing Ukraine of a “unilateral step that will also harm Slovakia” due to higher prices. However, Deputy Prime Minister Denisa Sakova said the country is “prepared for this scenario” and “there is currently no threat of a gas shortage in Slovakia”. Factories shut down in Moldova's breakaway Transnistria region due to the loss of supplies.
Supply routes
Europe is undoubtedly less exposed than it was before the tectonic shift of Moscow's February 2022 invasion of Ukraine. In the preceding years, Russia had regularly provided more than 40 per cent of the EU's imported gas – sometimes more than half – giving the Kremlin a key strategic hold over Europe.
As the war cut off supply routes and wiring money to Russia became politically challenging, the EU looked for alternatives. Norway and Algeria stepped up pipeline exports while cargoes surged of liquefied natural gas shipped from the US. The UAE's Adnoc signed a 15-year deal to sell gas to Germany.
As the Ukrainian route closes, imports from the Middle East and North Africa – including Algerian and Libyan pipelines and Qatari LNG shipments – are poised to pull ahead of Russia as a source of EU supplies, according to figures collected by economic think tank Bruegel. Norway now holds top spot by providing more than a third of the bloc's imported gas.
Still, Russia never vanished from the picture. Energy suppliers in Austria, Slovakia and Hungary still had contracts with Kremlin-owned provider Gazprom, and the Ukrainian transit route remained open. Austria, which had a deal until 2040, was getting 98 per cent of its gas from Russia as recently as December 2023.
The EU directly imported about 33 billion cubic metres of Russian gas in 2024 – well below the 150 billion in the last prewar year, but up from 27 billion in 2023. On top of that came Russian LNG shipments to European ports, some of it on transit routes set to be banned under EU sanctions from March.
Gasfields within the EU's borders in the North Sea, Black Sea and the Carpathian basin are too minor to take much strain. Globally, a “tightness of natural gas supplies” is expected to continue into 2025 and even 2026, according to the World Bank, which warned that “if current forecasts of Europe experiencing its coldest winter since 2020 prove accurate, this would exacerbate supply tightness”.
Storage goals
The EU has managed to use a little less thanks to energy-saving campaigns and the growth of solar panels and wind farms as an alternative to gas-fired power stations. Mild winters in 2022/23 and 2023/24 ensured worst-case scenarios of power rationing did not come to pass. Still, surging prices spurred economic gloom that contributed to government after government being voted out or losing its majority in 2024 elections. And analysts expect European demand to bounce back eventually, putting a bigger strain on supply.
After two thrifty years in which the EU withdrew about 175 terawatt hours' worth of gas from storage in November and December, it dipped into its gas tanks to the tune of 283 TWh in the last two months of 2024, while also putting less away.
As a result, the EU's gas tanks were only 72.2 per cent filled when the first lights of 2025 fell on Brussels, well below the previous year's figure of 86.4 per cent although still considerably higher than in the last winter of peacetime. Figures range from a full tank in Portugal to below 60 per cent in the Netherlands and France.
Unusually, prices for summer 2025 have been higher than winter 2025/26, reflecting a “possible rush to fill storage” once this winter ends, say analysts at Dutch bank ING. They predicted in a 2025 outlook for markets that European gas demand will rise about two per cent in 2025.
“Where demand ends up will depend on how winter weather evolves,” they said. Meanwhile, robust demand for LNG in Asia “suggests that we could see increased competition between the two regions, particularly if Europe faces a bigger job [relative to 2024] to refill its storage”.
