Geopolitical instability and shifting global trends have greatly influenced the gas market, especially in Europe. In Ukraine, the ongoing war is contributing to production declines and creating additional challenges.
As of February 11, 2025, European gas storage facilities were only 47.24% full, a significant drop compared to the same time last year, when they were 66.96% full. Over the first 11 days of February, European countries withdrew 5.9% of their underground gas storage reserves. With winter still ongoing and colder weather predicted for the coming week, these reserves are expected to decrease even more.
From February 7, 2025, the price of gas in European markets exceeded $600 per 1,000 cubic meters. This price quickly rose to nearly $650, and as of February 13, the cost ranged from $596 to $628 per 1,000 cubic meters. In contrast, gas prices during the same period last year averaged around $300 per 1,000 cubic meters. The last time gas prices surpassed $600 was in February 2023.
European Gas Market Overview
The current situation in Europe shows a tightening gas supply, with demand on the rise. As more gas is being bought than sold, prices have surged. There are no clear signs that prices will drop soon. In fact, as countries prepare for the summer by refilling storage facilities, competition for supplies is expected to increase, potentially driving prices even higher. On the other hand, the new U.S. presidential order to approve LNG export permits could provide Europe with additional gas supplies.
Ukrainian Gas Market Outlook
In Ukraine, the impact of the war is evident, as Russian forces have targeted gas production and infrastructure, affecting both state-owned and private facilities. Each missile or drone strike causes significant damage, disrupting production and supply capabilities. Restoring these facilities under martial law is both costly and time-consuming.
The Ukrainian government, along with Naftogaz, has confirmed that Ukraine will need to import gas this year, sourcing it from Europe. It’s important to note that the price of gas at European hubs will be higher once it is delivered to Ukraine—around €50 per 1,000 cubic meters. Additionally, VAT will be added to the price, raising the cost for domestic consumers by 20%.
Will Gas Prices Rise for Industrial Users?
Unless major geopolitical shifts occur, European gas prices are likely to remain high, with the potential for shortages. The EU is already discussing easing the mandatory 90% filling requirement for underground storage by November 1, as some nations believe it contributes to rising prices. The growing demand for LNG in Asian markets could further drive up prices in Europe, as countries compete for limited supplies. Conversely, if Asian imports decrease, European prices may stabilize. Additionally, China’s decision to impose duties on U.S. LNG could reshape global trade dynamics.
Given that Ukraine will be importing gas this year, high European prices will inevitably impact the domestic market, particularly for industrial users. Businesses should prepare for these rising costs.
While importing gas is an unfortunate necessity for Ukraine due to ongoing Russian attacks, the country’s focus should remain on increasing domestic production. Dependence on external markets is risky, and boosting local production will provide a more stable and cost-effective solution for Ukraine’s energy needs.
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