European natural gas futures have surged to their highest level since October 2023

Key Takeaways:

• European natural gas futures have surged to their highest level since October 2023, with prices climbing over 4% to €51 per megawatt-hour, after Russian gas flows to Europe via Ukraine stopped.
• The halt of Russian gas flows has exacerbated concerns about faster storage withdrawals, with European gas inventories already depleted at the fastest pace since 2021.
• Central European countries, particularly Hungary and Slovakia, are most vulnerable to the loss of Russian gas via Ukraine, despite having alternative routes.
• The European Union expects no immediate impact on consumer prices, but higher energy prices could hurt the bloc’s competitiveness and raise costs to households.
• Refilling gas storage could be more costly than expected, with gas prices for next summer surging above those for winter 2025-26.

A perfect storm of freezing temperatures and disrupted gas supplies has sent European natural gas prices soaring, with the benchmark Dutch TTF climbing to its highest level since October 2023. The sudden stop of Russian gas flows to Europe via Ukraine on New Year’s Day has sparked concerns about the region’s energy security, particularly in central European countries that rely heavily on Russian gas. The Ukrainian transit route, which has been in operation for decades, has been a crucial supply line for Europe, and its expiration has left a significant gap in the region’s energy mix.



As the European Union scrambles to find alternative solutions, gas prices have surged by 50% year-on-year, threatening to undermine the bloc’s competitiveness and increase costs to households. The European Commission has proposed several solutions, including diverting gas supplies from Greece, Turkey, and Romania via the Trans-Balkan route, to help affected countries such as Hungary and Slovakia. However, these alternatives may not be enough to fully compensate for the loss of the Ukrainian transit route, and the region may be forced to rely on more expensive liquefied natural gas (LNG) imports.

While there is no immediate risk of an energy crisis or shortfall in Europe, the long-term implications of the disrupted gas supplies are more concerning. With gas storage levels already depleted at the fastest pace since 2021, refilling them could be more costly than expected, particularly if gas prices for next summer continue to surge above those for winter 2025-26. As Arne Lohmann Rasmussen, chief analyst at Global Risk Management, warned, “There is an increasing risk that the EU will exit the winter with low gas storage levels, making it expensive to replenish them.”