The wholesale price of gas has risen to its highest level in more than a year after Russian supplies stopped flowing to Europe through Ukraine.
Benchmark prices rose to the highest level since October 2023, a day after a longstanding transit contract between Russia and Ukraine expired. Russian gas deliveries across Ukraine expired in the early hours of New Year’s Day after an agreement signed in 2019 expired.
Traders had been expecting the loss of Russian gas, with no alternative in place, and are closely monitoring whether it will lead to quicker withdrawals from storage facilities.
The price of gas for February delivery in the Netherlands rose as much as 4.3% on Thursday, before easing back to 1.9% higher at €49.83 a megawatt-hour, Bloomberg reported.
Storage supply levels across Europe are already falling at the fastest pace since 2021, as the conflict between Russia and Ukraine escalated.
Russia’s full-scale invasion of Ukraine in February 2022 set off the largest conflict in Europe since the second world war, pushing up the price of wholesale gas and leading to a rise in energy bills and forced the UK government to intervene to subsidise household costs.
Ukraine’s president, Volodymyr Zelenskyy, described the end of the transit deal as “one of Moscow’s biggest defeats” in a post on social media.
Related: Russian gas flows to Europe via Ukraine cease as transit agreement expires
Russian gas has flowed through Ukraine for decades, mainly via a Soviet-built pipeline that begins in Sudzha, a town in Russia’s Kursk region currently under the control of Ukrainian forces, and ends near Uzhhorod, on Ukraine’s western border with Slovakia.
Ukraine’s energy minister, German Galushchenko, called the move “historic”, ending the important energy route that dates back to the Soviet era and forcing countries across Europe to wean themselves off Russian gas supplies.
However, the end of the supply of gas, which Russia’s Gazprom said occurred at 8am Moscow time (5am GMT) on New Year’s Day, immediately resulted in power cuts for hundreds of thousands of people in a breakaway region of Moldova.
Slovakia’s prime minister, Robert Fico, who had lobbied against the decision, said that the supply cutoff will have a “drastic impact on us all in the European Union but not on the Russian Federation”.
“It’s worth bearing in mind that prices are still well beneath their levels seen throughout the entirety of 2022,” said analysts at Deutsche Bank. “But European gas storage ended 2024 at its lowest year-end level in three years, and the recent increase in prices is set to add further to inflationary pressures.”