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- Peace deal uncertainty clouds outlook for Russian energy flows, as Washington’s envoys push for a Ukraine-Russia agreement that Moscow has yet to endorse.
- Analysts say even a ceasefire would not reverse Europe’s break from Russian gas after 2022.
- Gas prices remain subdued despite lower storage, with EU reserves around 77% full and benchmark TTF prices dipping below €30/MWh for the first time in 18 months.
As the Trump Administration looks to broker a Ukraine-Russia peace deal, analysts and traders seek to anticipate how a potential agreement could change energy flows in Europe.
To be sure, a peace deal is far from certain, as stumbling blocks and differences remain, while Russia has not weighed in on the plan yet. White House envoy Steve Witkoff will travel to Moscow next week to discuss the peace plan with the Kremlin as Russia appears reluctant to accept any offer that doesn’t fully meet all its demands.
Even if a deal is reached – and this is not the base case scenario of many traders and observers – it is unlikely to change Europe’s reluctance to return to the Russian energy dependence which it has fought so hard to shake off. Most analysts say even a clean ceasefire wouldn’t meaningfully shift Europe’s stance after 2022.
Going off Russian pipeline gas cost European households and industries a lot as energy bills and industry costs surged. More than three years after the energy crisis began to take its toll on Europe’s cost of living and competitiveness, the prospect of eased energy flows from Russia is not particularly appealing to most of the EU.
No Turning Back
Russian gas has not been banned in the EU, and will not be for another year. As-is, the EU aims to stop LNG imports from Russia from 2027.
It’s unlikely that a peace deal would reverse Europe’s course to cut off dependence on Russian energy once and for all.
Europe also doesn’t have an easy way to restart Russian pipeline flows even if a peace deal landed tomorrow. Nord Stream is physically destroyed, Yamal–Europe has been shut since Poland terminated its contract, and Ukraine’s own transit agreement with Gazprom expires next year with no political appetite to renew it. The hardware, contracts, and politics simply don’t line up for a quick return.
“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,” Reuters columnist Ron Bousso wrote in his opinion column this week.
Indeed, most EU member states haven’t received Russian gas for three years and many don’t plan to return depending on the Kremlin for supply even if a fair peace deal for Ukraine is reached.
After three difficult years, and especially winters, with soaring gas prices in Europe, this year prices have held in a narrow trading range despite the fact that European gas storage sites were filling at a slower pace ahead of the winter compared to previous years. Storage levels are about 10 percentage points lower than at this time last year and the five-year average. As of November 25, gas storage sites across the EU were about 77% full, according to data from Gas Infrastructure Europe.
Despite the lower levels of gas in storage, the market appears to believe that Europe will have enough supply this winter, mostly thanks to record U.S. LNG exports, most of which are going to Europe right now.
Even if Russian pipeline gas magically came back into play, Europe has already rebuilt its entire supply picture around LNG.
Strong LNG Flows Ease Winter Supply Concerns
The U.S. exported 10.1 million metric tons of LNG in October, per data from LSEG cited by Reuters, becoming the first country ever to ship out more than 10 million metric tons in a single month. The start-up of Venture Global’s Plaquemines export project and the ramp-up of Cheniere’s Corpus Christi Stage 3 facility led the increase.
Europe took almost 69% of all U.S. LNG exports last month, the LSEG data showed.
The U.S. is set to further boost its LNG exports in the coming months and years.
The U.S. is expected to export 14.9 billion cubic feet per day of LNG this year, up by 25% from 2024, the Energy Information Administration (EIA) said in its latest Short-Term Energy Outlook (STEO) this month. Plaquemines LNG in Louisiana has ramped up exports more quickly than the EIA expected, leading the administration to raise its forecast of LNG exports in the current quarter by 3% compared with last month’s outlook. The EIA expects U.S. LNG exports to increase by an additional 10% in 2026.
The supply wave of U.S. LNG will continue through this decade as LNG developers are taking advantage of market and regulatory tailwinds to approve investments in new projects.
Supply from Qatar is also set to rise as the world’s second-largest LNG exporter after the U.S. is hiking production and export capacity in the biggest LNG expansion ever. Qatar looks to boost its export capacity by a whopping 85% from current levels by 2030.
The LNG supply wave is good news for Europe, if the EU moves to significantly scale back its Corporate Sustainability Due Diligence Directive (CSDDD), which places additional barriers to LNG flows to Europe, and even penalties on companies.
The EU is working to rewrite the proposed legislation, fearing its supply security is at stake.
With the start of the winter heating season amid lower-than-usual inventories, Europe’s gas prices haven’t spiked as in previous winters.
On the contrary, the benchmark price at the TTF hub in Amsterdam slipped below the key threshold of 30 euros per megawatt-hour (MWh) this week, for the first time in a year and a half, amid strong LNG flows, milder temperatures, and negotiations about the end of the war in Ukraine.
In a sign that gas supply conditions in France and Europe have stabilized, French supermajor TotalEnergies will demobilize its LNG floating storage and regasification unit (FSRU) in the port of Le Havre, which was installed in 2022 to serve as a “safety net” for gas supply. The floating terminal is no longer necessary, TotalEnergies said this week.
Another sign of a well-supplied market is that portfolio managers have turned increasingly bearish on European gas.
The latest positioning data showed that speculators shifted from a net long to a net short position on the Title Transfer Facility (TTF) futures for the first time since March 2024, according to ING.
“The move was once again driven by fresh shorts entering the market, which pushed the gross short to yet another record high,” ING strategists Warren Patterson and Ewa Manthey said on Thursday.
“This large short position leaves a fair amount of positioning risk, if any supply or demand surprises emerge through the winter.”
Related: UK Risks Gas Shortages in 2030s as Domestic Output Plunges