Gas Prices Surge as Ukraine Transit Deal Uncertainty Deepens
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European natural gas prices surged on Friday, driven by Russian President Vladimir Putin's latest pronouncements casting doubt on a post-2024 gas transit deal through Ukraine, as reported by Bloomberg.
Benchmark futures jumped as much as 5%, marking the most significant weekly increase, following Putin's Thursday statement that a new transit contract is "impossible" before the current agreement expires at the end of the year.
Central European nations reliant on Russian gas have floated alternative solutions to maintain flows through Ukraine. However, President Volodymyr Zelenskyy has firmly rejected any arrangement that channels funds to Russia during the ongoing war.
Putin acknowledged the complexity of various proposals, including Hungary, Slovakia, Turkey, or Azerbaijan assuming control of gas shipped via Ukraine. He cited existing long-term Gazprom contracts as a major hurdle to amending the current transit arrangement.
The potential loss of Russian gas transiting through Ukraine, accounting for roughly 5% of European demand, is a significant factor driving the market's uncertainty. Traders are closely monitoring European gas storage levels, which are currently below 75% of capacity.
Adding to the impasse, Putin pointed to an ongoing lawsuit filed by Ukraine's Naftogaz, alleging Gazprom's underpayment for transit services. He stated that the lawsuit must be withdrawn for any new transit agreement to be reached.
Dutch front-month futures, the European gas benchmark, rose 2.3% to €46.78 a megawatt-hour by mid-morning in Amsterdam. The January contract is set to expire on Monday.