Futures on natural gas in Europe soared by 15%, up to 107.00 €/MWh

Futures on natural gas on the Dutch TTF in the first hours of trading on May 12, 2022, rose sharply by 15%, up to 107.00 €/MWh, according to trading data. When translating the price for natural gas in Europe into other currencies, it yields over 1 150.00 $/tcm, or 45 000 UAH/tcm (incl. 20% VAT).

The main reason for the increase in prices is the reduction of Russian gas supplies to Europe via Ukraine down to 53 mcm a day on May 12, 2022, which became by another 26% less than the transit volumes a day before. In two days, the drop in transit of the Russian natural gas via Ukraine became by 45% less, from 97.5 mcm a day. on May 10, 2022, down to 53 mcm a day on May 12, 2022.

First of all, the Russian natural gas transit volumes via Ukraine slashed after the Gas TSO of Ukraine LLC (GTSOU) announced a force majeure, and stopped accepting bookings of transit capacities at the Sokhranivka gas interconnection point, as it is located in the territory temporarily occupied by the Ruscist troops arbitrarily interfering into the operation of main gas pipelines by stealing natural gas transit volumes.

 According to a DTEK representative, the occupiers are using the "stolen gas" to operate the Luhansk TPP, which was seized by the Russians.

At 6:55 a.m. on May 11, Gazprom cut off gas supplies to the Sokhranivka gas interconnection point , but did not substitute the missing daily transit volume by more supplies via the Sudzha gas interconnection point. The Russian company continues to bluntly claim that Gazprom is a reliable supplier and fully fulfills its contractual obligations.

On May 12, 2022, Gazprom noted that the GTSOU did not accept the nomination iof the capacity bookings at the Sokhranivka gas interconnection point, while the transit deliveries through Sudzha remain at 50.6 mcm a day. Deliveries via the Yamal main gas pipeline fell to zero, both to Poland and Germany.

The previous evening, a Resolution of the Russian government appeared on the official website of the legal information of the Russian Federation in accordance with the Decree of the President of the Russian Federation on special actions against unfriendly companies. The list of 31 companies includes Poland's Europol Gaz, which operates the Polish part of the Yamal main gas pipeline, and 30 companies linked to Gazprom Germania, which was nationalized in Germany last month.

The Gazprom Germania used to be a subsidiary of Russia's Gazprom, which tried to transfer it to some offshore management to avoid sanctions. However, the German government proved to be faster in its actions, nationalizing the company.

According to the published Russia's Resolution, any operations with companies sanctioned by the Russian Federation are prohibited, including the supply of natural gas. Market participants attribute the reduction in Russian gas supplies to the imposition of sanctions on these companies. Gazprom Germania will have to look for natural gas from other sources to replace Russian supplies, which will increase demand and prompt natural gas prices in Europe.

Russia is trying to demonstrate its strength and power in the gas market (by saying that gas is out of politics), as the European Union intends to impose a 6th package of sanctions to affect Russian oil after the Russian invasion into Ukraine. Gas remains virtually the only resource from Russia that Europe cannot give up quickly.

14:30 / 12 May 2022

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