European Gas Prices Fluctuate With Days Left on Transit Deal

(Bloomberg) -- European natural gas prices hovered near the highest level this month as storage levels deplete faster-than-normal and the end looms for the Ukraine-Russia gas transit agreement. 

Benchmark futures rose as much as 2.5% in early trading on Monday before easing slightly. Prices are hovering just below €48 a megawatt-hour, near the December-high, as traders gauge the potential impact of less Russian gas flowing into the region in the new year. 

The end of the gas transit agreement on Jan. 1 coincides with forecasts for colder weather across much of Europe, which could increase demand for gas for heating. The region’s inventories are being drawn down faster-than-usual which could make it more expensive for traders to secure enough gas for next year as they vie with Asia for seaborne supplies.

Slovakia is among the central European nations that still buy Russian gas and is pushing to keep the fuel flowing across Ukraine, but President Volodymyr Zelenskiy has rejected any arrangement that sends money to Russia while the war continues.

Slovak Prime Minister Robert Fico urged the European Commission to address the looming gas halt, saying the economic impact on the European Union will far outweigh the effect on Russia. Fico’s letter to European Commission President Ursula von der Leyen marks his first attempt to draw her personal involvement in the dispute by saying European households and businesses could face higher bills. 

The flows at risk account for about 5% of European demand. While that’s a small slice of the market, the loss of those volumes would force countries to rely more heavily on piped gas from Norway or liquefied supplies from the US.

Dutch front-month futures, Europe’s gas benchmark, fell  to € a megawatt-hour at 8:55 a.m. in Amsterdam. 

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