Gas Prices Surge on Reports of Russian Supply Termination
Unconfirmed rumors of the complete cessation of Russian gas supplies to Hungary sent the price of natural gas soaring to a record high on European exchanges for the first time since December.
On the TTF exchange, the benchmark gas contract was trading at €40 per megawatt hour (MWh) on the evening of August 9th, with futures contracts for September delivery hovering around €40/MWh, equivalent to approximately $439 per 1,000 cubic meters.
Analysts are closely monitoring the situation, though the current price is significantly lower than the peak of €300/MWh seen during the energy crisis of summer 2022.
Following Russia’s invasion of Ukraine, Europe severed its ties with Gazprom, the state-owned gas monopoly. While Austria and Hungary still receive Russian gas through pipelines traversing Ukraine, tensions remain high along the supply chain. Recent clashes have been reported near a pipeline connecting Russia and Ukraine, raising concerns about potential disruptions.
Despite the price increase, consumers may not immediately experience a surge in their gas bills. Many households have fixed energy contracts, which lock in prices for a year or more. Variable contracts, on the other hand, are adjusted periodically, usually every quarter or six months.
In Bulgaria, gas prices are adjusted monthly based on market data and long-term supply contracts with Azerbaijan.
The surge in gas prices coincided with a viral video on Facebook showing Ukrainian soldiers claiming to have taken over a Gazprom branch. The video’s authenticity and purpose remain unconfirmed.
Market analysts are anticipating potential disruptions to Russian gas supplies, leading to heightened market volatility. James Waddle, head of European gas and global LNG, warned of potential price increases and the potential re-ignition of coal-fired power plants in Europe.
Ukrainian forces recently crossed into Russia’s Kursk region, sparking reports of seizing a gas compression plant in the Suja region. The Ukrainian gas operator GTSOU has not confirmed these claims.