European natural gas prices are reversing their biggest slump in five years as concern mounts that tension between Russia and Ukraine will again disrupt flows to the region.
European natural gas prices are reversing their biggest slump in five years as concern mounts that tension between Russia and Ukraine will again disrupt flows to the region.
According to Bloomberg, gas for next-month delivery in the U.K. rallied 18 percent over the past six weeks as Ukraine said it may ban OAO Gazprom, Europe’s biggest supplier, from shipping the fuel across its territory because of Russia’s support of separatists. The Moscow-based company, which meets 15 percent of European gas demand through Soviet-erapipelinesacross Ukraine, halted supplies to its neighbor on June 16 in a debt and price dispute.
Gas storage in Ukraine is less than half full and the nation began this month to limit domestic use to conserve fuel. U.K. prices, the regional benchmark, fell to their lowest since 2010 last month after a mild winter left storage sites across the 28-nation European Union at their fullest for this time of year since 2008. Wholesale costs next quarter will be 11 percent higher than what companies are paying for that period now, according to a forecast by Societe Generale SA in Paris.
U.K. gas for next-month delivery gained 6.45 pence since falling to a four-year low on July 8 to 41.7 pence a therm ($6.93 a million British thermal units) by 9:25 a.m. in London, according to broker data compiled by Bloomberg. The front-month price is the lowest for this time of year since 2010. U.K. gas will average 64 pence a therm in the fourth quarter, forecasts Societe Generale. The contract for that period closed at 57.9 pence yesterday.
Ukraine will allow European utilities to buy Russian gas at its eastern border and sign new transit contracts with Naftogaz to bring it through its pipes even if a ban on Russian gas is imposed, he said.
Such renegotiations can’t be done in the "short term,” EU Energy Commissioner Guenther Oettinger said Aug. 12 in a statement. The bloc, which has been trying to broker a deal between Gazprom and Naftogaz since May, is working to set up trilateral talks in "early autumn,” he said, without providing dates.
"Ukraine respects European buyers’ long-term Russian natural gas contracts and understands that amendments require time and careful negotiation,” Naftogaz saidAug. 13. "The current situation cannot be considered stable. The possibility of a crisis similar to 2009, when Gazprom terminated gas transit to Europe, cannot be ignored.”
