European gas costs surge due to cold weather, anti-Russian sanctions

Gas prices in Europe surged by 21% in November, reaching around $521 per 1,000 cubic meters, according to data from the London-based ICE exchange with several factors contributing to this sharp increase.

Notably, there was a record rate of gas withdrawals from European storage facilities amid colder weather, combined with announcements of a halt in Russian gas supplies by Austrian company OMV and concerns about payment difficulties for Russian gas due to US sanctions on Gazprombank, Caliber.Az reports, citing TASS.

On October 31, gas futures were trading at around $432 per 1,000 cubic meters. By November 29, however, prices had risen to $521, reflecting a 21% increase over the previous month.

In December 2023, the average gas price in Europe stood at approximately $408 per 1,000 cubic meters. Prices then gradually declined until April 2024: to $337 in January (a 53% year-on-year drop), to $288 in February (down 51%), and to $302 in March (38% lower). However, prices began to climb again, reaching $320 in April (33% lower than a year earlier), $357 in May (up 0.2%), $384 in June (5% higher), $366 in July (9% higher), $437 in August (10% higher), $416 in September (down 0.3%), and $456 in October (down 11%). November saw a smaller increase, reaching $491 per 1,000 cubic meters (up 4%).

The price rise can largely be attributed to a number of factors. One of the key drivers was the unusually high rate of gas withdrawals from European underground storage facilities, as cold weather set in. As of now, storage in Europe is less than 87% full, holding about 96 billion cubic meters of gas. Since the start of the heating season at the end of October, EU countries have already taken nearly 11 billion cubic meters of gas from storage. The European Centre for Medium-Range Weather Forecasts is predicting the coldest winter in several years for the region.

Further adding to market concerns were reports of OMV ceasing Russian gas flows to Austria, despite volumes remaining unchanged in other directions. OMV stated that it had received notification from Gazprom Export about halting deliveries under its Austrian contract starting November 16. This move followed OMV's attempt to recover €230 million from Gazprom Export via arbitration over a dispute regarding gas deliveries to Austria through Ukraine. The dispute arose after the Nord Stream pipeline explosion and the suspension of the Yamal-Europe pipeline due to sanctions.

Additionally, in late November, the US imposed sanctions on Gazprombank, which handles international payments for Russian gas and oil. Following the announcement, Turkish officials expressed concerns about the negative effects on their country, while Hungary stated there were no issues with paying for gas despite the sanctions. Hungarian Foreign Minister Peter Szijjarto held talks with Russian Deputy Energy Minister Pavel Sorokin on the matter. Experts have warned that the US sanctions could force international buyers of Russian oil and gas to find alternative payment methods, potentially leading to higher costs. For Europe, this may result in rising prices for Russian energy supplies.

Earlier, TASS reported that the EU purchased a record €840 million worth of Russian pipeline gas in September, the highest value since February 2023. Meanwhile, imports of Russian LNG also reached their highest level since April 2024.

By Tamilla Hasanova