A concatenation of threats regarding the sale of gas to Europe has become a dire omen for energy prices in 2025, when the European gas cap ends on January 31. The warnings from Donald Trump, the notices from Qatar and the end of the agreement between Russia and Ukraine to transport Russian gas to the European continent together with the increase in EU sanctions add more uncertainty at a time when reserves are depleting more faster than expected.
The European association of gas infrastructure operators (Gas Infrastructure Europe) has warned that the volume of stored gas has fallen by 19% since the end of September, when the refilling season ends. EU storage levels stood at 75% in mid-December. At the same time last year, gas tanks were 90% full. The last time the continent’s gas reserves emptied so quickly was in 2021, when Russia shut down its pipeline supplies ahead of the invasion of Ukraine. There are differences between countries: France recorded a 28% drop in its gas reserves, while in Germany the decrease was more than 15% and in the Netherlands it has decreased by 33%.
Winter has arrived with colder temperatures in Europe. Gas consumption has skyrocketed in central Europe and countries like Germany, where the cold has coincided with what is known as dunkelflute, when due to lack of wind and cloudy days, renewable sources generate little energy. The translation has been an increase in the price of electricity that has caused December to be the most expensive month of the year, since combined cycle gas plants have to be used to cover demand. In Spain, December is also going to be the month with the most expensive electricity in the wholesale market, with an average of more than 106 euros/MWh.
To avoid supply problems and lower prices, last Friday the German parliament eliminated the gas storage rate at connection points near the border. The objective of this measure is to make gas imports from its neighbors cheaper when the measure comes into force on January 1.
The countries of the European Union agreed in December 2022 to put a cap on the price of gas to avoid rates outside of market prices that led thousands of families to energy poverty and the strangulation of their industry. A year later, with energy prices already stabilized, the area’s ministers decided to extend the gas cap until January 31, 2025 with a limit of 180 euros/MWh. At the moment, prices have fluctuated a lot in recent weeks but have stayed at 45 euros/MWH.
But also, there is nervousness in the TTF market of gas in the face of threats from countries that have become the main gas suppliers to the European Union. On the one hand, Donald Trump has threatened to impose tariffs if the EU did not increase its purchase of more oil and gas from the United States. “I say to the European Union that they must compensate for their tremendous deficit with the United States by purchasing our oil and gas on a large scale. Otherwise, TARIFFS!!!”, said the US president-elect on a social network. According to Eurostat data, the United States is already the main seller of liquefied natural gas (LNG) to the EU with 47% of imports in the first quarter of 2024.
On the other hand, Qatar, the second largest supplier of liquefied natural gas to the European Union, has threatened to stop its LNG shipments if the EU applies new legislation that will penalize companies that do not meet established criteria on carbon emissions and human and labor rights in the Directive on business due diligence. In an interview with financial times, Qatari Energy Minister Saad al-Kaabi stated that if any EU state imposed sanctions for non-compliance with the Directive, Qatar would stop exporting its liquefied natural gas. Companies that do not comply risk fines that can reach 5% of the company’s annual global revenue.
“If we lose 5% of my income generated by going to Europe, I will not go to Europe. . . I’m not bluffing. 5% of the revenue generated by QatarEnergy means 5% of the revenue generated by the State of Qatar. “This is the people’s money… so I can’t lose that much money,” said the Qatari Energy Minister. Saad al-Kaabi noted that it would be impossible for an energy producer like QatarEnergy to reach the EU’s net zero emissions target.
These two threats come together at the end of the agreement between Russia and Ukraine on December 31 that allowed the transit of Russian gas to the European Union. The President of Ukraine, Volodymyr Zelensky, announced that his country will not allow the transportation of gas of Russian origin unless it has guarantees that the Kremlin will not benefit economically while the war lasts. An interruption of flows would especially harm countries such as Slovakia or Austria, which have warned of possible economic damage. Now, 5% of EU gas imports arrived through this pipeline.
The EU imported almost 82.7 million tonnes of LNG in 2024, almost half of which came from the US, according to data from S&P Global Commodity Insights. Of the total, the EU imported some 14.9 million tons of Russian LNG. Spot prices for LNG imports for delivery to Europe have remained volatile in recent weeks, driven by supply uncertainty.
According to a spokesperson for the Russian LNG Association, US and European authorities will do everything possible to completely expel Russian gas from the European market, with a view to new capacities being launched in the US and Qatar in the next two years replace Russian LNG in the EU, as explained to S&P Global Commodity Insights.
Last June, the EU approved the 14th package of sanctions against Russia, which seeks to prohibit the supply of goods, technology and services to LNG projects under construction in Russia. This package also prohibited the transshipment of Russian LNG through EU ports from March, as well as the import of Russian LNG to specific terminals not connected to the EU gas pipeline network. On December 16, the European Commission gave the green light to the 15th package of sanctions with the aim of hindering the operation of the Russian fleet that moves in the shadows. The objective is to increase the operating cost of said fleet.
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