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European gas prices hit record high as Russia supply fears grow

European gas prices hit record high as Russia supply fears grow

The European Parliament demanded on Tuesday that the EU restrict its ports to Russian ships and ships bound for or returning from Russia.

Although the European Parliament does not impose sanctions and its decision on Tuesday was not legally binding, traders said it provided a clear indication of how penalties against Russia, which provides almost 40% of the EU bloc’s natural gas, would be tightened.

No, not all countries receive their gas supplies directly from Russia; however, if countries such as Germany, the world’s largest consumer of Russian natural gas, receive less supply from Russia, they must replace it with supplies from other sources, such as Norway, which has a knock-on effect on the amount of gas available for other countries.

On Wednesday, a record intraday high of $205 (185 euros) per tonne was reached for the benchmark Dutch front-month gas contract at the TTF hub. This was just one cent higher than the previous high of $204 (184.95 euros), which was reached in December when Russian gas flows through the significant Yamal pipeline began sending gas eastwards in reverse.

The front-month contract in the United Kingdom reached 384 pence per therm, the second-highest level in the contract’s history, after allegations that Russian cargoes of liquefied natural gas were being diverted away from UK ports.

“The price movement today is not based on significant changes in the European gas balances,” said Leon Izbicki, an Energy Aspects analyst specializing in European natural gas.

According to him, it is believed that European sanctions targeting Russian energy exports are becoming more likely, which is the primary reason for the steep spike in the TTF.

The actual delivery of gas from Russia to Europe via its many pipelines has remained essentially intact despite the continuing conflict in Ukraine.

Even gas exports from Russia through pipelines that pass through Ukraine have remained stable. It was projected that on Wednesday, capacity nominations for supply to Slovakia from Ukraine through the Velke Kapusany border point would reach their highest level so far in 2022, with 881,917 megawatt hours being nominated.

However, traders and experts said that as the conflict and sanctions deepen, the likelihood that this will alter increases, generating massive price rises to be seen in the market.

According to Cornwall Insight’s Craig Lowrey, a senior consultant, with the possible supply interruption from Russia resonating across the European energy market, unpredictable energy prices are expected to persist for the foreseeable future.

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