European benchmark gas futures this week eased back on gains after hitting a first-time record of €200 a megawatt- hour (approximately $222 at current exchange rates), amid the escalating violence in Ukraine following Russia’s invasion of the country on Feb. 24 and tough new Western sanctions targeting Moscow.
After trading within the €100 per megawatt-hour during the first half of this week, the benchmark front-month European natural gas futures contract soared to €200 per megawatt-hour on the Dutch TFF in Amsterdam on the morning of March 3, its first time on record.
However, subsequent trading saw the front-month contract (currently April) ease to €147.5 a megawatt-hour by 4:59 p.m. GMT, down 10.899 percent on the day.
As of 1.0 pm (GMT) on March 4, the front-month contract was up at €188.635 a megawatt-hour, up 17.294 percent on the start of the day’s trading.
The gas price swings come against a backdrop of already steep price hikes over the past 12 months in Europe and historically low gas inventories across the region.
“In the short-term, this crisis is adding to the ongoing energy crunch, particularly in Europe,” said Jarand Rystad, the CEO of Oslo-based independent energy research and business intelligence company Rystad Energy, in a research note on March 3, as cited by Bloomberg.
While Western penalties on Russia are not specifically targeting Russian natural resources, traders and shippers are shying away from dealing with Russian suppliers, including the energy trading arm of state-run oil and gas producer Gazprom PJSC, according to a Bloomberg report.
Russian gas continues to flow through pipelines to Europe, including those transiting Ukraine – that is, as of March 3 – with reports that flows had increased since the invasion last week.
The European Commission is set to propose measures next week that outline how the European Union could wean itself off Russian gas, which makes up around 40 percent of the imports (GM Feb. 25, pp. 1 and 34). However, it likely would take years to implement.