European Natural Gas Prices Approach Monthly High Amid Rapid Storage Depletion and End of Ukraine-Russia Agreement

image

European Natural Gas Prices Approach Monthly High Amid Rapid Storage Depletion and End of Ukraine-Russia Agreement

Investing.com -- European natural gas prices are approaching their highest levels of the month due to faster-than-normal depletion of storage levels and the impending expiration of the gas transit agreement between Ukraine and Russia.

In the early hours of Monday, benchmark futures rose by up to 2.5%, before slightly retreating. Prices are currently just below €48 per megawatt hour, close to the peak reached in December as traders assess the potential impact of reduced Russian gas supply to the region next year.

The gas transit agreement between Ukraine and Russia is set to expire on January 1. This coincides with anticipated colder weather across much of Europe, which could increase demand for heating gas.

The region's gas stocks are depleting faster than normal, meaning traders may face higher costs as they compete for sufficient gas supplies via seaborne shipments from Asia for the coming year.

Among Central European countries, Slovakia continues to purchase Russian gas and advocates for the continued flow of fuel through Ukraine. However, Ukrainian President Volodymyr Zelenskyy has rejected any agreements involving sending money to Russia during the ongoing war.

Slovak Prime Minister Robert Fico has called on the European Commission to address the impending gas supply cut. Fico noted that the economic impact on the European Union will be much more significant than the effects on Russia. In a letter to European Commission President Ursula von der Leyen, Fico emphasized that European households and businesses could face rising bills.

The at-risk gas supply accounts for about 5% of European demand. While this represents a relatively small portion of the market, the loss of these volumes would require countries to rely more heavily on pipeline gas from Norway or liquefied supplies from the U.S.

The Dutch front-month gas futures, the European gas benchmark, fell by 0.798% to €47.35 per megawatt hour at 08:55 Amsterdam time.