European and UK benchmark natural gas prices jumped after Kremlin-run Gazprom warned that the remaining gas route to Europe, via Ukraine, is now at risk of being shut off.
Bloomberg reported on Wednesday, Gazprom threatened to switch off gas flows through Ukraine because of a legal dispute over transit fees which provoked Moscow to sanction Ukraine’s gas company Naftogaz. The possibility of the shutdown would leave just one route — the TurkStream pipeline — sending gas to Turkey and Russian allied countries.
Now there’s a large chance of Europe being left without any Russian gas for much of the winter, benchmark Dutch front-month futures soared 12% to €209 per megawatt hour on Tuesday morning, up from €180 per megawatt hour the day before. U.K. gas futures
for October were up 23% to £315 per megawatt hour.
Nord Stream blame game
The gas price jump comes after leaks to both Nord Stream pipelines on Monday escalated diplomatic relations between Nordic and German countries with Russia.
The leak has been named a potential environmental disaster as the greenhouse gasses bubbled to the surface of the Baltic Sea. On Monday, seismologists also reported explosions in the area, which have yet to be explained.
Maritime authorities have cordoned off the area and are keeping watch to steer ships away as they could lose buoyancy or the leaked gas could ignite and explode.
European leaders suspected sabotage to the three leaks made to the Nord Stream 1 and 2 pipelines under the Baltic Sea in Swedish and Danish waters.
Both the Swedish and Danish prime ministers, Magdalena Andersson and Mette Frederiksen, said the incident was most likely “deliberate” and authorities are racing to investigate the leaks.
Fingers were pointed at Russia, which has continued to withdraw gas flows to Europe over the last year. Kremlin spokesman Dmitry Peskov has said “no option can be ruled out right now” when asked if the damage was due to sabotage.
Head of the European Commission Ursula von der Leyen has warned whoever sabotaged the lines would result in the “strongest possible response”.
Former Polish defence minister Radek Sikorski blamed the explosion on the U.S.
A conference with reporters and President Biden from back in February began to circle online after the leak, in which Biden said: “If Russia invades…then there will be no longer a Nord Stream 2. We will bring an end to it.”
Deutsche Bank analysts say the leaks were a “fresh reminder” of the risk of further removal of gas from Russia.
“After the tumultuous events of recent days, market volatility has remained very high over the last 24 hours, with plenty of negative headlines to keep investors alert,” says Deutsche Bank’s Jim Reid.