It looks like Vladimir Putin has just come in to call a (temporary) halt to the gas crisis in Europe, finally stepping in with comments that have offered some stability to the market after a tumultuous morning/week.
The Russian president said yesterday (Wednesday) that his country would boost gas supplies in Europe and stood ready to stabilise the global energy market. Gazprom, Russia’s primary gas exporter, said it expected natural gas exports to Europe to hit record levels this winter. This could also mean that gas transit through Ukraine will exceed Russia’s contractual obligations with the government in Kiev. Gazprom will be hoping that European countries will apply pressure on Ukraine to allow volumes to increase.Henry Hub Natural Gas prices were offered on the comments/headlines that Russia is ready to help out.
“The situation remains difficult of course but could be that Putin has just put a ceiling on these crazy market moves for the time being,” observed Neil Wilson, chief markets analyst at Markets.com. “There are other factors, but a boost in supply from Russia would ease immediate concerns in Europe. Longer-term of course the lack of fossil fuel capex in response to high prices is a big driver of prices staying higher for longer.”
Winter is coming and supplies are looking short
Winter is coming and supplies are still very short and markets volatile. Plus how long does Putin play nice? Anyway it seems to have calmed the market for the time being.
“One thing you have to take from all this is that Nord Stream 2 is surely going to be approved soon,” Wilson observed. “Merkel [was] stressing in comments [yesterday] that it is not yet ready.”
Henry Hub prices tumbled off the highs to test $6 again on the news crossing the wires. UK prices have meanwhile completed a heck of a round trip with a daily gain of 40% reduced to 4%. Whilst US natural gas prices are not directly correlated to the situation in Europe we can see that the comments from Putin hit prices as they crossed the wires. Oil was also pulled down on the comments as well.
Just taking a step back and looking at how these commodities prices have performed over the last 12 months, traders can see how punchy this market has been. Natural gas is up 141% in the last 12 months, heating oil is up 120%, WTI is up 101%, Brent crude oil is up 100%. Even gasoline futures are up 93%.
Gas market is now incredibly volatile
The gas market looks pretty volatile right now, with plenty of new traders piling in. ICE Futures Europe briefly limited trading on UK natural gas prices on Wednesday as prices ballooned 39%.
The energy complex seems to be offering some of the biggest potential returns going into the winter months. Gas took an 8.3% hit on the news out of Moscow. In our previous coverage we have noted the importance of Russia to the European gas market, so Putin’s comments are important. However, it also demonstrates the level of Russian influence that now exists over European gas supplies.
Let’s also not forget Merkel’s comments on energy infrastructure. With many UK motorists still routinely queuing for fuel at the pumps, the difficulties a lack of infrastructure can create for energy prices are all too obvious.
