European gas prices soared to 50 euros for the first time in more than a year on signs that Russian gas supplies to Europe via Ukraine will be halted on Wednesday after a transit deal expires. According to data released by Ukrainian network operators, the initial order for natural gas at the Sudzha import station on the Russia-Ukraine border was zero on January 1. This data may still be updated. This data represents customer order requests for natural gas, not actual supply.
This is the first tangible sign that Russian gas supplies through Ukraine - which has been a major transit route for decades - will cease at 6am Central European Time on New Year's Day. The five-year transit agreement between Moscow and Kiev is set to expire when it expires at the end of 2024, with no replacement in sight despite months of political wrangling.
The question now is whether the disruption will be permanent and what impact it will have on Europe as global gas markets tighten. Although supply losses from Russia account for only about 5% of Europe's natural gas demand, the continent is still suffering the aftermath of the energy crisis triggered by the Russia-Ukraine conflict. Europe has also been burning through inventories faster than usual.
European benchmark natural gas prices have risen 55% so far this year, setting up their biggest annual rise since 2021. In Amsterdam, February futures were up 4.5% at 50.04 euros per megawatt hour as of 5:07 p.m. The front-month contract rose to its highest level since October 2023.