Shock on the gas market: What is happening with prices after the Ukrainian incursion into Kursk

(Patria) - The blockade of gas flows from Russia to Europe via Ukraine and the military action of Ukrainian forces in Russia have pushed spot gas prices on the Old Continent to their highest levels since the beginning of the year.

Trading on Europe's largest gas exchange in the Netherlands closed on Friday at a price of 41 euros per megawatt-hour, an increase of 14 percent since the start of the week.

"An early halt to transit gas deliveries via Ukraine, in light of the incursion of Ukrainian troops this week into southwestern Russia, could lead to a jump in winter prices by an additional 17 percent from current levels to around 50 euros per megawatt-hour," assessed an analyst from Energy Aspects for the Montelnews portal, as reported by Jutarnji list.

The market is definitely reacting to the threat, and it is not negligible, the portal emphasizes.

The attention of shareholders on the European gas market was also drawn by information that Ukrainian forces, during their campaign in Russia's Kursk region, captured the Sudzha gas compression facility near the town of the same name.

Montelnews reports information from the Ukrainian company managing the gas pipelines that they have no knowledge of the capture of Sudzha and that there has been no interruption in gas flow from the interior towards Sudzha.

The aforementioned portal recalls that there is information and video footage published on the geolocation platform Geoconfirmed showing Russian prisoners of war outside the facility in Sudzha. It adds that an advisor to Ukrainian President Volodymyr Zelenskyy confirmed the action of capturing Sudzha to the Washington Post, on condition of anonymity.

"We see a scenario in which Gazprom could decide not to transport gas through Sudzha given the report of the occupation of the metering station by Ukraine, or fighting near the station could cause damage and interrupt the flow," analyst James Waddell assessed for Montelnews.

Depletion of reserves

Although, the portal recalls, it was expected that Russian gas flows through Ukraine would cease by the end of the year, the immediate loss of Russian supply via this route would reduce expected gas reserves in European storage facilities at the end of October. At the same time, it estimates that the depletion of reserves at a faster-than-expected pace would likely not be a problem for the upcoming heating season, but refilling in 2025 would be, Montelnews concludes, "very difficult."

"If there were an immediate reduction in Russian supply, we would expect prices on the Dutch TTF exchange for winter 2024-25 to be at 50 euros per megawatt-hour, with the option of widespread substitution of gas with coal," Waddell commented.

Montelnews reports reassurances from shareholders on the gas market that the market is currently well supplied, and the storage situation is quite relaxed.

Gas reserves in the European Union, according to the latest measurements by the association of European gas operators Gas Infrastructure Europe, are at 87 percent of capacity, with fill levels steadily increasing and approaching the target of 90 percent.

"A mild start to winter could limit further increases in gas prices," an analyst from a German utility company assessed for Montelnews.