(Bloomberg) — European natural gas prices fluctuated near €44 a megawatt-hour with little over a week left until the expiry of a key pipeline transit deal between Russia and Ukraine.
Prices have been volatile as traders process remarks from political leaders on the future of the flows still preferred as the most affordable option in a number of central European nations. Ukraine said last week it won’t agree to alternatives that result in transiting Russian gas.
In a rare visit to Moscow by a European leader on Sunday, Slovak Prime Minister Robert Fico discussed the looming end of the deal with Russian President Vladimir Putin. Fico said Putin confirmed that Russia was ready to continue delivering gas to the West via Ukraine, but this would be “practically impossible” after Jan. 1 given Kyiv’s stance.
Putin Meets Slovakia’s Fico in Moscow Before Gas Deal Expiry (2)
Ukrainian President Volodymyr Zelenskiy last week indicated Ukraine won’t transit Russian-origin gas unless he has assurances the Kremlin won’t benefit financially while the war continues.
The loss of the transit deal would mean Slovakia and other countries that are still getting the Russian fuel via Ukraine — mainly Czech Republic, Austria and Italy — would have to use costlier alternatives such as liquefied natural gas. While meeting only a fraction of European gas needs now, the abrupt halt of the Ukraine route could still lead to price gains next month.
Europe Braces for Tense Countdown to Ukraine Gas Flow Halt (1)
Storage levels across Europe are at lower levels than last year, which would make it more challenging to refill inventories next summer.
In addition, largely windless weather is forecast in northwest Europe by the end of this week, which may boost demand for gas as a power-generation fuel. At the same time, mild weather is expected until the end of December, with some cooler days at the beginning of the next month.
Dutch front-month futures, Europe’s gas benchmark, was little changed at €44.08 a megawatt-hour as of 9:19 a.m. in Amsterdam.
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