Natural gas prices in the EU have climbed to their highest level in two years, driven by a combination of cold weather, declining gas reserves, and concerns over potential US tariffs on imports for the EU.
Benchmark futures rose by over 4% on Monday reaching $620 per 1,000 cubic meters or €58 per megawatt-hour in household terms, the highest since February 2023, according to data from the Intercontinental Exchange (ICE).
The previous record of over $590 per 1,000 cubic meters was set last month after Ukraine refused to extend a gas transit agreement with Russia. The five-year contract with Russian energy giant Gazprom expired on December 31, cutting off pipeline gas supplies to Hungary, Romania, Poland, Slovakia, Austria, Italy, and Moldova. Ukrainian leader Vladimir Zelensky said the termination of the contract was aimed at eliminating Moscow’s energy revenues.
Northwestern Europe is bracing for freezing temperatures in the coming days, which are expected to increase heating demand and accelerate the depletion of gas reserves. Stockpiles are currently at 49% capacity, the lowest for this time of year since the 2022 energy crisis, compared to 67% a year ago, according to Bloomberg.
Traders are also monitoring the impact of potential US tariffs on EU goods, the outlet noted. US President Donald Trump announced plans on Sunday to impose a 25% tariff on all steel and aluminum imports into the country and is considering similar duties on European products. He previously demanded that the EU increase its purchases of American liquefied natural gas (LNG) or face import tariffs.
These measures could lead to retaliation, according to Bloomberg, potentially increasing the cost of LNG imports, for which the US is the EU’s largest supplier.
Despite efforts to reduce reliance on Russian energy in the aftermath of the escalation of the Ukraine conflict in 2022, Russia became the second-largest supplier of LNG to the EU last year. According to Eurostat, in the third quarter of 2024, its share stood at 18.9%, compared to 37.8% provided by the US.
The EU has faced a dramatic reduction in Russian gas imports, which previously accounted for 40% of the bloc’s total supply, due to Ukraine-related sanctions and the 2022 sabotage of the Nord Stream pipelines.
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