Natural gas prices in Europe skyrocketed after Russia launched a military operation in Ukraine that Western Europe, the United States, and several allies condemned as a full-scale invasion.
Wholesale prices at the European gas hub in the Netherlands on Thursday reached $159 (142 euro) per megawatt-hour, the Financial Times reported, before retreating somewhat, for a total daily gain of 40 percent.
European commodity traders are rushing to stock up on Russian gas, with pipeline flows increasing by close to 40 percent, Bloomberg reported earlier. Fears about supply disruptions, however, remain, even though some of it went away when President Biden avoided the imposition of energy-related sanctions against Russia.
“The west can’t afford energy sanctions given where oil and gas prices are,” Energy Aspects’ Amrita Sen told the Financial Times.
The U.S. sanctions Biden unveiled yesterday targeted Russia’s banking industry and included measures aimed at curbing Russian lenders’ ability to operate in dollars, euro, pound sterling, and yen, Reuters reported.
Five banks were named as objects of sanctions, including top lenders Sberbank and VTB. Sberbank has been barred from the U.S. financial system, meaning it will no longer be able to make transactions involving U.S. banks.
Although Russia has said it will not cut gas supplies to Europe, concern about outages remains.
“Oil and natural gas prices have become the crisis’ fear barometer,” Norbert Rücker, Julius Baer head of economics and next generation research told the FT. “Any disruption of flows between Russia and Europe, due to damage or sanctions, would drastically add to the already present supply scarcity.”
Russia supplies close to 40 percent of the natural gas Europe consumes, and before the Ukraine escalation, traders had expected this to increase with the entry into operation of the Nord Stream 2 pipeline.
However, in the wake of the Russian invasion of Ukraine, Germany suspended the certification of the project, and the United States imposed sanctions on the consortium in charge of the project, which pushed futures prices significantly higher, too, Reuters noted in a report.
By Irina Slav for Oilprice.com
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