European gas prices soar 22% in Germany-Russia spat over supply Oil & Gas News

Russian shipments through Ukraine will drop by about 30% on Thursday as the war in Ukraine disrupts cross-border entry points.

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European gas prices have soared after a major shipping route through Ukraine was disrupted and, as Germany says, Russia is using the energy as a weapon in response to an escalating supply conflict.

Benchmark contracts surged more than 22%, and shipments from Russia through Ukraine were set to drop about 30% on Thursday as the war disrupted cross-border entry points. This added to the market’s concerns as Moscow stopped shipments to Gazprom Germania GmbH and its subsidiaries in retaliation.

Moscow on Wednesday night approved the former Gazprom PJSC subsidiary – now controlled by Germany’s energy regulator – including energy supplier Wingas GmbH and London-based Gazprom Marketing & Trading Ltd. The move could also upend the LNG market, with greater impact. Supply concerns.

Still, German Economy Minister Robert Habeck played down the impact, saying Russia’s production cuts accounted for only 3 percent of the country’s imports. He said the country was getting goods from other sources and could cope with disruptions. Utility RWE AG said the new Russian sanctions “do not matter”.

European gas prices rise again after calm

The new risk comes as a solution to a major problem that has been vexing for weeks appears to be emerging – Moscow’s demand for rouble payments for its gas. Companies are increasingly confident they can keep buying Russian supplies without violating sanctions, a move Italian Prime Minister Mario Draghi appeared to back on Wednesday. More European buyers are opening ruble accounts.

“These developments are just the latest in the deteriorating security of supply during the war,” the Eurasia Group said in a report. “Continued disruptions will therefore mean EU countries will step up preparations for a larger disruption to Russia’s gas supply this year. .”

European benchmark Dutch front-month gas prices rose 20% to 113.01 euros per megawatt-hour as of 1:54 pm in Amsterdam. UK equivalents rose 37%. German power also surged, with contracts up as much as 17% next month.

Concerns about Russian supplies have clouded the market for months. Grid data showed that traffic through Ukraine could hit its lowest level since late April. This should affect key gas transport routes through Slovakia and Austria. Authorities in Vienna say there are currently no restrictions on deliveries.

Natural gas flows through Ukraine|

The supply via Nord Stream to Germany (the largest pipeline from Russia to Europe) remains stable. But, in addition, traffic from Norway will be reduced on Thursday.

On Wednesday, Ukraine’s gas grid stopped accepting Russian fuel at one of two key entry points, saying it could no longer control related infrastructure in the occupied territory of eastern Ukraine. Gazprom said it was unable to reroute all supply to another entry point because of the way its system currently works.

For the second day in a row, no Russian gas has flowed into the Sokhranivka station on the Ukrainian border. Before it was stopped, Sokhranivka had already processed about a third of the Russian gas flow through Ukraine and the rest through another entry point, Sudzha.

“The lost supply of Sokhranivka is not serious, but it sends a signal of what may lie ahead,” analysts at SEB said in a note. “It didn’t spark a crisis, but it was a wake-up call for what was to come. We may see more supply disruptions in the future.”

Market news, analysis

  • RWE says next gas payment to Russia due at end of May
  • Commerzbank will have to review rules if gas stops: CFO
  • LNG WRAP: Asian buyers seek more long-term supply as spot prices rise
  • Asian spot LNG prices likely to rise on low inventories: BNEF

—With the help of Todd Gillespie.

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