Uncertainty over Russian gas payments pushes prices higher, warm weather is coming to the US

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Uncertainty over Russian gas payments pushes prices higher, warm weather is coming to the US

Concerns about how European countries can legally pay for Russian gas supplies without breaching sanctions are driving prices higher today.

After mixed messages emerged from both sides earlier this week, the situation seems as clear as mud.

Greater clarity regarding payment mechanisms or a consensus between Russia and the EU is essential to allay the concerns of market participants.

According to EU guidelines, companies will not violate sanctions if they report transactions made after paying in euros or dollars, but they are not allowed to open another ruble account with Russian banks.

Meanwhile, Russia has claimed that opening a ruble account is a must and that European companies must complete all currency conversions within 48 hours.

Due to the uncertainty, the first month TTF has increased by 3.1% to €97.1 per megawatt hour (MWh) or $30/MMBtu at the time of writing, since the last settlement at €94.2 /MWh or $29.1/MMBtu.

However, some major European companies have already announced their payment plans.

Italy’s Eni has opened a ruble account with Gazprombank to secure Russian gas supplies, but on paper the move appears to be a violation of EU sanctions.

German Uniper and French Engie said they would pay Gazprom in euros this month.

Finn Gasum takes a different approach and said he would not pay in roubles, but acknowledged the possibility of Russia cutting off its gas supply.

The Finnish company aims to access other sources of gas from Estonia via the Baltic Gas Pipeline.

Overall, market reactions appeared muted and expect more responses from all parties.

Another positive factor pushing the TTF higher is a new EU plan.

The commission aims to raise 20 billion euros by selling ETS certificates to finance a Russian energy exit.

This could potentially drive down carbon prices in Europe and lead to lower costs for coal and other carbon-intensive fuels, although this is not in line with the long-term energy transition goal.

Pipeline flows to Europe are largely stable.

Russian flows fell 0.6% overnight to 208 MCMD, and Norwegian pipe flows rebounded 2.3% to 314 MCMD after flows fell slightly to 307 MCMD the previous day. .

Lower LNG imports into the UK and increased pipeline flows to Belgium and the Netherlands are pushing prices higher.

Similar to the TTF move, NBP prices rose 1% day-on-day to 187 GBP/Therms or $23.4/MMBtu at the time of writing.

In addition, UK gas consumption in the residential and electric sectors has increased slightly, which could lead to storage withdrawals and lead to even higher prices.

The rebate on TTF currently stands at $6.6/MMBtu, down from $6/MMBtu in the last session.

In the US, the Henry Hub is relatively stable today at $8.25/MMBtu, slightly down 0.7% from last settlement at $8.3/MMBtu, but fundamentals could offer some upside .

Recent warm weather in the south is providing an upward impetus to gas demand and could push prices higher in the near term.

High temperatures well above the five-year average are expected to return in early June and, coupled with low gas storage and high LNG exports, upward pressure on prices is expected to persist.

In Asia, the prospect of China’s plan to ease Covid controls is keeping LNG spot prices in Asia relatively stable at $23.4/MMBtu, while actual purchases from Chinese importers have yet to rebound.

The spot price in Asia remained below TTF, at around $6.8/MMBtu.

The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the editor and publisher(s) of Natural Gas World.

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