European gas prices touch new highs as Russia supply fears grow
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[March 02, 2022] By
Susanna Twidale
LONDON (Reuters) - European and British gas
prices soared on Wednesday, with a benchmark Dutch gas price hitting a
record high as countries said EU sanctions against Russia could target
gas shipments, while some cargos of Russian liquefied gas changed
course.
Britain on Monday ordered Russian-associated vessels be blocked from its
ports to while officials from some European Union countries have said
the 27-country bloc is considering a ban on Russian ships.
The European Parliament on Tuesday called for the EU to close its ports
to Russian ships or ships going to or from Russia.
Although the Parliament does not set sanctions and its vote on Tuesday
was non-binding, traders said it showed the direction of travel for
possible tightening of measures against Russia which supplies around 40%
of the bloc’s natural gas.
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Not all countries get supply directly from Russia, but if countries such
as Germany, the biggest consumer of Russian gas, receive less from
Russia, they must replace this from elsewhere, for instance, Norway,
which has a knock-on effect on available gas for other countries.
The benchmark Dutch front-month gas contract at the TTF hub hit a record
intra-day high of 185 euros a tonne on Wednesday, just beating the
previous high of 184.95 seen last December when Russian flows through
the major Yamal pipeline began sending gas eastwards in reverse.
Graphic: Dutch front-month gas price:
https://fingfx.thomsonreuters.com/
gfx/ce/xmvjoenmjpr/Pasted%20image%201646223662404.png
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The British front-month contract hit 384 pence a therm, its second highest ever
level amid reports Russian cargos of liquefied natural gas (LNG) were being
diverted away from UK ports.
“The price move today is not based on fundamental changes to the European gas
balances,” said Leon Izbicki, European Natural Gas Analyst at Energy Aspects.
"The main driver behind the sharp rise in the TTF is a perceived increase in the
risk of European sanctions targeting Russian energy exports," he said.
Despite the ongoing war in Ukraine physical deliveries of gas from Russia to
Europe through its various pipelines have so far remained largely unchanged.
Even gas coming from Russia via pipelines through Ukraine have remained robust.
Capacity nominations for supply to Slovakia from Ukraine via the Velke Kapusany
border point were expected to hit their highest level so far in 2022, at 881,917
megawatt hours (MWh) on Wednesday.
But traders and analysts said as the war and sanctions escalate so do the
possibilities that this could change, which is causing the huge price gains.
“With the potential supply disruption from Russia reverberating throughout the
European energy market, volatile energy prices are likely to continue for the
foreseeable future,” said Dr Craig Lowrey, Senior Consultant at Cornwall
Insight.
(Reporting By Susanna Twidale, additional reporting by Kate Abnett and Nora Buli;
Editing by Toby Chopra)
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