European gas prices rose on the first trading day of the year as the region faced the prospect of freezing winter temperatures, compounded by the loss of a critical gas supply source, Bloomberg reported on Thursday.

Front-month benchmark prices climbed by as much as 4.3%, reaching €51 per megawatt-hour, the highest since October 2023. Russian gas shipments through Ukraine ceased on New Year’s Day after a transit contract expired, and no replacement agreement has been made.

Traders are closely monitoring whether this disruption in Russian flows, a vital source for several Central European countries, will lead to faster withdrawals from gas storage. Inventories are already depleting at the quickest rate since 2021 when the initial stages of the gas crisis began.

The timing of the cutoff aligns with forecasts of sub-zero temperatures across Europe, especially in Slovakia, where temperatures may drop to as low as minus 7°C (19°F) by mid-January, increasing heating demand.

Expensive, limited gas supply in Europe

While Europe is unlikely to run out of gas this winter due to existing inventories and alternative supplies, refilling storage for the next heating season could become more difficult, as per the report.

Gas prices for the summer of 2025 recently surged above those for the winter of 2025-26, making restocking more expensive. "There is an increasing risk that the EU will exit the winter with low gas storage levels, making it expensive to replenish them," Arne Lohmann Rasmussen, chief analyst at Global Risk Management in Copenhagen, told Bloomberg.

Currently, Russia only delivers gas to Europe through one remaining route — a pipeline across Turkey to Hungary — and any disruptions on this route will be closely monitored. The loss of flows through Ukraine will also increase Europe’s dependence on liquefied natural gas (LNG), including Russian shipments. Russia became the second-largest LNG supplier to Europe last year, after the US, which recently brought two new export plants online.

However, for landlocked countries in Central and Eastern Europe, the cost of importing LNG via sea and then regasifying it in places like Germany, Poland, or Greece is high. Slovakia, for example, estimates that importing gas from the West could cost an additional €177 million ($183 million).

"Gas markets in Europe are in no way short," said Walter Boltz, a former Austrian regulator and senior energy adviser at Baker & McKenzie LLP as quoted by Bloomberg. However, he added, "transporting the fuel from west to east is somewhat constrained, so that this will result in a markup for the region."

Europe will also face increased competition for LNG this year, particularly during the summer months when demand for air conditioning rises in Asia. While new LNG export plants are under construction globally, significant capacity additions won’t be available for several years.

As of 8:10 a.m. in Amsterdam, February gas futures for delivery in the Netherlands increased by 3.1%, reaching €50.39 per megawatt-hour. Futures had already exceeded €50 on December 31, driven by expectations of a supply halt.

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