Gas prices in Europe rose above $600: implications for the Ukrainian market

Reserves in the EU are declining, while demand is growing

Geopolitical instability and rapidly changing trends have a significant impact on the global gas market and the European market in particular. In addition to this, in Ukraine we also have the consequences of the war, which directly affect production volumes.

According to the latest data from Gas Infrastructure Europe, as of February 11, 2025, EU gas storage facilities were 47.24% full, last year on the same day 66.96% of the resource was there, and in 2023 – 66.52%. Over 11 days in February, European countries withdrew 5.9% of their underground gas storage facilities (UGS). Given that winter is not yet over and a sharp cold snap is expected in Europe in the coming week, gas reserves will decline even further.

Starting from February 7, 2025, the price of gas at European hubs crossed the $600 per 1 thousand cubic meters mark. In the following days, the price approached $650, and as of February 13, the resource costs $596-628 per 1 thousand cubic meters. For comparison, in the same period last year, it cost an average of $300 per 1 thousand cubic meters. The last time the gas price was above $600 was in February 2023.

The current situation in Europe is that there is less and less gas, and the demand is growing: it is bought more often than sold. This has led to the price going up, and there are no significant prerequisites for gas to become cheaper. On the contrary, the increase in demand in spring and summer, when countries are actively pumping into underground storage facilities and competing for the resource, will create additional pressure and may lead to an even greater jump. At the same time, the order of the newly elected US President to unblock permits for LNG exports from new projects may provide additional gas volumes to the continent.

Prospects for the Ukrainian gas market

In recent weeks, Russian troops have attacked gas production facilities and gas infrastructure of both state-owned and private companies. Any missile or drone strike has significant consequences that directly affect production volumes and gas supply capabilities. It also puts additional pressure on the producers, as it takes time and money to restore the destroyed infrastructure, especially under martial law.

The relevant ministry and the Naftogaz Group have already stated that this year Ukraine will have to import gas, which we will buy in Europe. It is no coincidence that I spoke about the situation and trends at the beginning. It is worth noting that the price of gas at European hubs should be supplemented by its delivery to Ukraine – about €50 for every 1,000 cubic meters. On top of that, there is VAT, because the resource will be sold on the domestic market to the end consumer, which is 20% of the cost.

Should we expect a price increase for industrial users?

Unless there are any significant geopolitical changes, the cost of gas in Europe will be high, and moreover, the resource may become potentially scarce. The EU is well aware of this and has already begun discussing an initiative to ease the mandatory requirement of 90% filling of underground storage facilities by November 1. Some countries believe that this figure provokes a rise in gas prices. Another factor that affects pricing is demand in Asian markets. If Asian countries increase their LNG imports, this will lead to a price increase in Europe due to competition for supplies. If the opposite happens, price pressure in the EU will ease. It is also worth mentioning China’s imposition of duties on American liquefied natural gas, a move that could significantly transform global trade flows.

Given Ukraine’s need for imports this year, high gas prices in Europe will have an impact on the domestic market, especially on industry. Businesses need to be prepared for this.

In any case, gas imports are a bad story for Ukraine, but this year they will be forced due to Russian attacks. The state needs to focus on its own production and its increase, because independence from markets guarantees the existence of its own internal indicator, which in practice is lower than the European one.