Yahoo Finance European Natural Gas Prices Surge 25% Amid Talk of Tighter Russia Sanctions
By Geoffrey Smith
Investing.com -- European natural gas futures surged some 25% in early trading on Monday to new record highs, amid talk of tighter sanctions on Russian energy exports.
The April contract for Dutch TTF gas futures rose to 242 euros ($263) a megawatt-hour at the open, from a Friday closing level of 192.55 euros. That's over 14 times the level they were trading at a year ago.
The move came after U.S. Secretary of State Anthony Blinken said that the U.S. is actively talking to European allies about closing the existing loophole in Western sanctions against the world's largest energy exporter, which exempts payments for oil and gas from restrictions.
Russia accounts for nearly half of Europe's gas imports and over a quarter of its total energy supply, meaning that a real ban on buying Russian fuel would trigger a massive scramble for alternatives. Russian gas has continued to flow through existing pipelines to Europe throughout the war, which is now in its 12th day.
European buyers have already scaled back their purchases of Russian oil in recent days, despite the loophole allowing them to carry on purchases, due largely to ethical concerns and reputational risks. Monthly export tenders from big Russian oil producers such as Surgutneftegas and Lukoil attracted no bidders last week.
On Friday, Shell (LON:RDSa) was hit with a furious barrage of criticism after confirming that it bought Russian oil at an export tender at a discount of some $28 a barrel to current market rates. Shell issued a statement at the weekend saying that it will divert the profits from that trade to charities helping victims of the war.
Europe's ability to source alternatives to Russian natural gas in the short term is extremely limited. While the season of peak demand is approaching its end, demand is set to rise this week due to a blast of colder weather - also, ironically, originating in Russia.
The move in energy prices has exposed the degree to which Europe, more than any other region, is economically dependent on Russian energy. The euro has sunk to its lowest level in nearly two years since Russia invaded, amid speculation that the European Central Bank will either suspend or slow its moves to withdraw the extreme monetary stimulus that it introduced at the start of the pandemic.
By 3 AM ET (0800 GMT), the euro was down 0.5% at $1.0876. The Russian ruble was also suffering on the back of Blinken's statements. The dollar rose another 12% to a 24-year high of 137.44 rubles.
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