European and British gas prices soared on Wednesday, with a Dutch benchmark gas price hitting a record high as countries said European Union sanctions against Russia could target gas shipments, while some Russian liquefied gas shipments changed course.
The UK ordered on Monday that ships associated with Russia be blocked at its ports, while officials from some EU countries said the 27-nation bloc was considering a ban on Russian ships.
Although the Parliament does not set sanctions and its vote on Tuesday was non-binding, traders said it pointed the way to possible tougher measures against Russia, which supplies about 40% of the EU bloc’s natural gas.
Not all countries buy gas directly from Russia, but if countries like Germany, the biggest consumer of Russian gas, get less from Russia, they have to replace it with other countries, for example Norway, which has a knock-on effect on the gas available to other countries.
The benchmark Dutch gas contract for the first month at the TTF hub hit an intraday high of $205 (€185) a tonne on Wednesday — just beating the previous high of $204 (€184.95), seen last December when Russia’s main Yamal pipeline began sending gas east in the opposite direction.
The UK front-month contract hit 384 pence per thermie, its second-highest level on record as Russian liquefied natural gas cargoes were diverted from UK ports.
“The price movement today is not based on fundamental changes in European gas balance sheets,” said Leon Izbicki, European natural gas analyst at Energy Aspects.
“The main driver of the sharp rise in the FTT is a perceived increase in the risk of EU sanctions targeting Russian energy exports,” he said.
Despite the ongoing war in Ukraine, physical gas deliveries from Russia to Europe through its various pipelines have so far remained largely unchanged.
Even gas deliveries from Russia via pipelines through Ukraine have remained robust. Capacity nominations for supplies to Slovakia from Ukraine via the Velke Kapusany border point are expected to reach their highest level so far in 2022, at 881,917 megawatt hours on Wednesday.
But traders and analysts said that as the war and sanctions intensify, the possibilities that this could change are also increasing, leading to huge price gains.