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Europe Rushes To Buy Russian Gas As Spot Prices Skyrocket

European commodity traders are scrambling to get as much Russian gas as they can under long-term contracts after spot market prices soared 60 percent in the wake of the Russian invasion of Ukraine yesterday.

As a result, Russian gas flows through Ukraine rose by 38 percent, according to the Ukrainian grid operator, Bloomberg reported, and will likely continue up in the coming days, too. Traders, the report noted, had already booked an additional 6.5 million cubic meters a day in pipeline capacity from Russia to Europe.

Current market prices are “well above the likely sales price for many Gazprom import contracts and so driving purchases higher,” BloomberNEF analyst Stefan Ulrich said, as quoted by Bloomberg. “There may also be a strategic component as buyers seek to buy now given a potential for disruption in flows or further price increases,” he added.

Moscow has repeatedly said that it has no intention of shutting off the gas supply to Europe, but the degree of mutual mistrust has reached such a high between Russia and the West that this has been brushed off, and the continent is preparing for shortages, especially after the EU threatened fresh sanctions on Russia.

Among the proposed determent measures are shutting off access to European capital markets for a number of Russian banks, a ban on certain state-owned companies from listing on EU stock exchanges, and preventing Russian citizens from making big deposits in European banks, the Financial Times reported earlier on Friday.

Other sanctions include the suspension of exports to Russia of aircraft and aircraft components and equipment for the upgrading of oil refineries.

“We will hold the Kremlin accountable. The package of massive and targeted sanctions European leaders approved tonight clearly demonstrates that,” Ursula von der Leyen, the president of the European Commission, said. “It will have maximum impact on the Russian economy and on the political elite.”

By Irina Slav for Oilprice.com

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