The spread between Europe’s natural gas prices for this winter and next is widening, signaling near-term risks are easing but greater uncertainty ahead.

Futures for December 2023 are trading at a discount of about 8% to December 2024, according to ICE Endex data. That’s a reversal from January, when the nearest winter contract traded at a premium.

The shift indicates Europe is relatively well-prepared for the coming heating season following a mild winter that allowed it to build up inventories with an influx of liquefied natural gas. But the coming years are more uncertain, as the region adjusts to a new reality with scant help from former top supplier Russia.

Winter next year “feels more risky,” said Nick Campbell, a director at consultant Inspired Energy. It will be too soon to benefit from additional flows of LNG from the US — scheduled to come online starting 2026 — and the weather can’t stay mild forever. A cold winter this year could potentially lower storage balances ahead of next summer, he said.

A gas-transit deal between Moscow and Kyiv is also set to expire in December 2024. That adds risk to the remaining Russian flows to Europe that come via Ukraine, according to James Waddell, head of European gas and global LNG at consultant Energy Aspects Ltd. The last round of negotiations between the two parties took place at the last minute, with a deal reached just days before the previous one expired.

Higher gas prices would hamper Europe’s efforts to fight inflation. Soaring costs last year crimped industrial activity and reduced demand for the fuel, which may never return. Traders are also keeping a close eye on the pace of economic recovery in China, which vies with the region for deliveries of LNG.

Europe can still come close to meeting storage targets, relying on increased flows from North Africa and competing for limited LNG with Asia, according to Kateryna Filippenko, director of global gas research at Wood Mackenzie Ltd. “But any further supply disruption or abnormally cold weather can risk European storage refill,” she said.

The market is expected to remain tight and vulnerable to price spikes until 2026, when massive new export plants in Qatar and the US are due to start shipping fuel.

“After this and the next two winters, things should get better, depending a little bit if there’s a delay or not on global liquefaction capacity,” Helge Haugane, senior vice president for gas and power marketing at Norway’s Equinor ASA, said in early May.

Dutch front-month gas, Europe’s benchmark, traded down 2.4% at €25.70 a megawatt-hour at 9:25 a.m. in Amsterdam. The equivalent UK contract fell 3%.

--With assistance from Olga Tanas.