Rising Gas Prices and Uncertainty Shape Europe’s Energy Outlook for Winter

Natural gas prices in Europe are climbing, reflecting concerns over supply stability and increasing demand as the continent braces for its third winter since Russia’s invasion of Ukraine.

Despite these concerns, current gas reserves are considered adequate. Dr. Yousef Alshammari, President of the London College of Energy Economics, told Euronews Business: “Uncertainty over supply continues to dominate markets despite sufficient reserves.” He noted that EU gas storage reached 90% capacity by August, well ahead of schedule, and now stands at 95%, exceeding 100 billion cubic meters (bcm).

However, colder weather has already stressed storage levels. In the first two weeks of November, withdrawals from European reserves reached 4.29 bcm, roughly 4% of total capacity, according to Gas Infrastructure Europe.

Winter Demand and Future Storage Challenges

Alshammari predicts that storage levels by Spring 2025 will fall below those of April 2024, when reserves stood at 60%. “This winter could see levels dip below 50%, requiring significant gas purchases next year to restore capacity. Combined with colder weather, prices are likely to remain higher than last winter,” he said.

Geopolitical Risks and Supply Disruptions

Geopolitical tensions, particularly between the US and Russia, continue to drive energy price volatility. Alshammari suggested that while tensions might ease under the next US administration, current complexities are likely to keep prices unstable.

On November 16, Russia’s Gazprom halted gas flows to Austria due to a bilateral dispute, exacerbating Europe’s energy concerns. Additionally, a key contract allowing Russian gas transit through Ukraine will expire on January 1, 2025. This could eliminate half of Russia’s remaining pipeline gas exports to the EU during peak demand.

“Further disruptions to Russian gas will strain EU storage and drive prices higher,” Alshammari warned. He noted that reduced pipeline supply might push Europe toward coal and oil for power generation, impacting broader energy markets.

The decline in Russian imports and rising demand may also increase reliance on LNG imports, further elevating overall energy costs in Europe.

The Role of Renewable and Nuclear Energy

While gas demand has decreased—from 350 bcm in 2022 to 295 bcm last year—renewables and efficiency improvements have played a significant role. EU gas consumption dropped by 3.2% in the first half of 2024, attributed to higher renewable energy output and efficiency measures.

“The share of renewables rose to 44.7% of EU electricity production, up 12.4% from 2022, while fossil fuels fell to 32.5%,” Alshammari said. Yet, he cautioned that renewables alone cannot shield Europe from energy crises.

Countries like Austria, Norway, and Iceland benefit from hydropower and stable prices, but the broader EU must diversify. “Energy efficiency, coal reactivation, and increased nuclear output were crucial during past crises,” he said, noting that nuclear power accounted for 22.8% of EU electricity in 2023. Diversifying the energy mix, including nuclear energy and renewables, could provide greater resilience.