Gas withdrawals from EU underground storage tanks have accelerated as Europe suffers from the first cold snap of winter. Gas tanks were 85.5% full as of December 1, having peaked at 95.3% full on October 29, according to Gas Infrastructure Europe (GIE). (chart)

The current level of gas storage on December 1 is slightly down on the 94.8% and 92.3% full the tanks were on the same day in 2023 and 2022 respectively, but well ahead of the 68.2% full they were in 2021, a very cold winter.

Typically, the heating season officially kicks off on November 1, when EU rules say the tanks have to be at least 90% full. But uncertainty over the weather has already driven up gas prices by 45% since the start of this year, as the tanks are being emptied at a faster rate than in the previous two years.

Additional uncertainty has been added to the mix this year because Ukraine’s gas transit deal, which accounts for 15bn cubic metres of gas supplies to the EU from Russia, is due to expire on December 31 and Kyiv has promised not to renew it. Russia’s state-owned Gazprom has just released its investment plans for 2025 and those also assume the Ukraine transit deal will not be renewed.

The International Energy Agency (IEA) has already issued a warning that Europe could be facing a “new energy crisis” due to the end of the Ukrainian deal and the faster than normal drain on stored gas.

Higher energy costs will only exacerbate high cost-of-living conditions on consumers and make Europe’s looming recession worse, say economists. Europe is already facing a crisis after the report from former Italian Prime Minister and ex-European Central Bank boss Mario Draghi warned that Europe has lost its competitive edge. Germany is particularly vulnerable,  as its energy costs are already the highest in Europe.

Ukraine ready for a tough winter

Ukraine’s tanks are only 22.6% full and hold 6.5 bcm of gas, which authorities say is enough to get the country through the winter. Before the war Ukraine's natural gas consumption varied depending on the weather and industrial activity, but in 2023 the country's total annual gas consumption was approximately 18.7 bcm of which 8-10 bcm is needed for the heating season. A particularly cold winter can typically add demand for an additional 1.5 bcm.

But demand in Ukraine for gas has been greatly reduced after Russia destroyed half the country’s non-nuclear heating and power plants; the lack of generating capacity, not the lack of fuel, is the challenge for Ukraine this winter.

Ukraine's storage facilities are the largest in Europe, with a total volume of more than 30 bcm, with 15 bcm still available for European partners. Last year foreign speculative traders stored some 3.2 bcm in Ukrainian tanks, but this year with the Russian attacks on Ukraine’s energy assets, the foreign traders have remained away.

Europe experienced a cold snap at the end of November where temperatures fell fast.