The wholesale price of gas has risen to its highest level in more than a year after Russian supplies stopped flowing to rest of Europe via Ukraine.
Benchmark prices rose on Thursday to the highest level since October 2023, a day after a longstanding transit contract between Russia and Ukraine expired. Russian gas deliveries across Ukraine ended in the early hours of New Year’s Day.
Traders had been expecting the loss of Russian gas, with no alternative in place, and were closely monitoring whether it would lead to quicker withdrawals from storage facilities.
The price of gas for February delivery in the Netherlands rose as much as 4.3% on Thursday, before easing back to 1.9% higher at €49.83 (£41.44) a megawatt hour, Bloomberg reported.
Storage supply levels across Europe are already falling at their fastest rate since 2021, as the conflict between Russia and Ukraine escalated.
Russia’s invasion of Ukraine in February 2022 set off the largest conflict in Europe since the second world war, pushing up the price of wholesale gas and leading to a rise in energy bills. This forced the UK government to intervene to subsidise household costs.
In a post on social media, Ukraine’s president, Volodymyr Zelenskyy, described the end of the transit deal as “one of Moscow’s biggest defeats”.
Russian gas has flowed through Ukraine for decades, mainly via a Soviet-built pipeline that begins in Sudzha, a town in Russia’s Kursk region now under the control of Ukrainian forces, and ends near Uzhhorod, on Ukraine’s western border with Slovakia.
Ukraine’s energy minister, German Galushchenko, described the cutting off of the transit route as “historic”. He said it would force countries across Europe to wean themselves off Russian gas supplies.
However, the end of the supply of gas, which Russia’s Gazprom said occurred at 8am Moscow time (5am GMT) on Wednesday, immediately resulted in power cuts for hundreds of thousands of people in a breakaway region of Moldova.
Slovakia’s prime minister, Robert Fico, who had lobbied against the decision to end the transit of gas through Ukraine, said it would have a “drastic impact on us all in the European Union but not on the Russian Federation”.
Analysts at Deutsche Bank said: “It’s worth bearing in mind that prices are still well beneath their levels seen throughout the entirety of 2022. But European gas storage ended 2024 at its lowest year-end level in three years, and the recent increase in prices is set to add further to inflationary pressures.”
