The gas price at the Dutch TTF hub, the benchmark gas price for Europe, surged to a record high early on Wednesday amid concerns about supply disruptions from Russia and traders steering clear of deals with Gazprom’s trading unit.
The front-month Dutch TTF natural gas futures soared by 60% to over $215 (194 euro) per megawatt-hour, hitting an all-time high in early trade in Amsterdam on Wednesday, while the front-month UK gas contract jumped by 33%.
The market is increasingly apprehensive about a potential disruption to natural gas supply—be it additional sanctions targeting Russia’s energy, a possible Russian retaliation to sanctions by halting pipeline supply, or a direct hit on a pipeline carrying gas from Russia via Ukraine.
European gas “has entered demand destruction territory,” Ole Hansen, head of commodity strategy at Saxo Bank, said on Wednesday, with prices 10 times higher than the latest average. The gas price for winter 2022/23 is also blowing out, Hansen added.
European gas prices have been highly volatile since Russia invaded Ukraine last week, and now traders and buyers in Europe seem to be staying away from deals with the trading unit of Russian gas giant Gazprom, sources with knowledge of the matter told Bloomberg on Wednesday.
Companies and power and gas traders could also begin unwinding previously agreed contracts and banks could shun business with Gazprom and its affiliates, according to Bloomberg.
“The highly unpredictable geopolitical situation and risk for further escalation and new sanctions are likely to support prices further,” Refinitiv analysts told Reuters on Wednesday.
Russian LNG is also being shunned. According to vessel-tracking data from Refinitiv Eikon cited by Reuters, several LNG tankers from Yamal LNG in Russia have switched status to “For Orders” in the past days, from previously signaling France and the UK as destinations.
Meanwhile, as of early on Wednesday, Russian pipeline gas flows to Europe continued as normal.