Middle East conflict drives European gas prices higher

By Rhod Mackenzie

On Friday, 27th October 2023, gas prices in Europe saw only a slight change based on the feeling that there are sufficient supply levels and a prediction of warm weather in the region. However, prices remained close to the year’s peak. Interestingly, the weather seemed less significant to European politicians when compared with Ukraine’s refusal to continue transiting Russian gas supplies.

Thus, the Director of Ukrainian Naftogaz, Alexey Chernyshev, stated last week that Kyiv would not continue the gas transit agreement with Russia. “We will not initiate this transit any further. The contract will be concluded, and the transit will cease,” he pledged.

As per Chernyshev, Ukraine presently doesn’t require gas imports from Russia and transit is solely facilitated to assist EU nations, specifically the landlocked ones. He reminded that the European Union aims to quit the usage of Russian gas by 2027. According to him, Kyiv desires to expedite this process as much as possible and plans to “accelerate” Europe.

As reported by Gazprom, the requests for transferring Russian gas to Europe through Ukraine and the Sudzha gas measuring station equal to 42.4 million cubic metres per day. The contract for the transit of Russian gas through Ukraine terminates on December 31, 2024.

Gas prices at the European TTF centre are currently at this year’s peak, surpassing £400/1000 cubic metres, notes Ekaterina Krylova, analyst at the PSB Analytics.The surge in prices can be attributed to the present situation in the Middle East and the potential for it to escalate.
The analyst states that gas exports to Egypt have ceased from the Mediterranean field near the Gaza Strip, which in turn supplied Europe. Although Egypt’s portion of global gas supplies is minor, the conflict risks expansion, and if Iran intervenes, it may block the Strait of Hormuz, impacting the supply of Qatari LNG.

Concurrently, Gas Infrastructure Europe reports that European gas storage facilities are nearly full at 98.7%. “The projected drop in temperature at the start of December is likely to increase demand for raw materials during the ‘heating season,” asserts Ekaterina Krylova. “In addition, geopolitical risks will maintain high prices.”
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Middle East conflict drives European gas prices higher

By Rhod Mackenzie On Friday, 27th October 2023, gas prices in Europe saw only a slight change based on the felling that thre are sufficient supply levels…