Don’t Expect Ukraine Peace Deal to Alter Europe’s Gas Gameplan

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PSYCHOLOGICAL SHIFT

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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% year-on-year so far in 2025, but they are 10% 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 U.S. liquefaction capacity comes online.

Global LNG cargoes in transit surged to a record 22 million tons last week, with the U.S. accounting for more than a third, according to Kpler.

And U.S. LNG capacity – which has risen about 15% this year to 19 billion cubic feet per day – is set to climb to 27 bcfd by the end of 2027, according to LSEG.

UPSETTING THE BALANCE

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 central and eastern European countries, 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 U.S. 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.

Ron Bousso Editing by Marguerita Choy