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View all search resultsDon’t expect Ukraine peace deal to alter Europe’s gas game plan
Whether the US-brokered peace deal to end the Russia-Ukraine war comes through, Europe is unlikely to shift back from LNG, mostly from the US, to its preinvasion overreliance on Russian pipeline gas.
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A LNG tanker ship makes its way past migrants attemping to cross the English channel on a smuggler's boat off the coast of Calais, north-western France, on Oct. 23, 2024. (AFP/Sameer Al-Doumy )
E
urope’s gas market is far calmer today after years of turmoil that saw the region swap Russian supplies for liquefied natural gas (LNG) imports, a strategy that is unlikely to change even if United States President Donald Trump brokers a peace deal in Ukraine.
The White House is pushing Moscow and Kyiv to agree to a plan to end the almost four-year war. If successful, Russian oil and gas might soon begin to trade more openly, but that will likely do little to change Europe's gas landscape.
Benchmark TTF European gas prices traded below 30 euros (US$35) per megawatt-hour this week, the lowest for this season since before Russia's full-scale invasion of Ukraine in February 2022. Prices also slipped 2 percent on Tuesday after reports that Kyiv had backed parts of the deal.
That muted reaction reflects the enormous transformation of Europe's gas market since the invasion and the resulting EU sanctions on Russia triggered the region's worst energy crisis in 50 years.
Europe has today largely shaken off its outsized preinvasion reliance on Russian pipeline gas, shifting instead to LNG, primarily from the US, the world's top producer and exporter of the fuel.
So after three anxious winters dominated by fears over dwindling storage levels, the well-supplied market has settled into a new, calmer norm.
Recent price behavior tells the story.
A cold spell hit North West Europe last week, leading to a rapid depletion of gas stocks, with the region’s gas demand jumping 80 percent from the previous seven days, according to LSEG data. And European gas storage is currently only around 79 percent full, compared with 88 percent last year and a 10-year average of 86.5 percent, according to Gas Infrastructure Europe.
A few years ago, this scenario would likely have triggered a price spike and political panic, but not this year: Prices have barely budged. The difference is LNG. Ample cargoes, mostly from the US, have kept any nerves in check, helped along by forecasts for milder temperatures in the coming weeks.
A psychological shift in Europe’s gas market appears to have taken place: Traders now assume gas will be there.
First, European LNG imports are also not sky-high. They may be up around 10 percent year-on-year so far in 2025, but they are 10 percent below 2022 and 2023 levels for the same period, according to Kpler data.
Yet even with Europe sitting on less gas storage, TTF prices are still only around a quarter of 2022 levels and roughly a third lower than in 2023 and 2024. This suggests traders are relaxed about Europe having sufficient gas supplies this winter, even if storage levels decline.
That confidence rests on a wave of new supply, with even more expected as new US liquefaction capacity comes online.
Global LNG cargoes in transit surged to a record 22 million tonnes last week, with the US accounting for more than a third, according to Kpler. And US LNG capacity, which has risen around 15 percent this year to 19 billion cubic feet per day (bcfpd), is set to climb to 27 bcfpd by the end of 2027, according to LSEG.
Risks remain. A prolonged cold snap in Europe or Asia could intensify competition for cargoes and tighten the market. That is unlikely to produce extreme price swings, however, given the current supply-demand balance.
Nor is a Ukraine ceasefire likely to upend this new equilibrium. While news of a deal might initially spur a price move, it probably wouldn’t prove durable.
Even if sanctions on Russia's energy sector were eased, European governments would be reluctant to re-embrace Moscow as a core supplier after the shock of 2022.
Some limited Russian flows might resume, especially to landlocked countries in Central and Eastern Europe, and Russian LNG projects could add more volumes to the global market. Most of those flows, however, would likely continue to be absorbed outside Europe, as they have since the invasion.
While Europe’s new LNG-focused gas strategy has its risks, including a heavy reliance on US supplies, it offers more room to maneuver compared with the inflexibility and vulnerability of heavy pipeline dependence on Russia.
This new balance should offer European consumers and industries much relief, and hopefully predictability, following the crisis years since 2022.
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The writer is a columnist for Reuters.
