Wholesale Gas Prices Surge as Russian Supplies Halt for Europe
Gas prices have soared to their highest in over a year following the end of Russian supplies to Europe, raising concerns about energy security.
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Prices jumped significantly, reaching levels we haven’t seen since October 2023. This happened right after a key transit contract between Russia and Ukraine expired. The deal, which was signed back in 2019, officially ended on New Year’s Day.
Traders were already bracing for this loss of Russian gas, and now they’re keeping a close eye on how quickly gas will be pulled from storage facilities.
In the Netherlands, the price for gas delivery in February rose by about 4.3% on Thursday, settling at €49.83 per megawatt-hour, according to Bloomberg.
Storage levels across Europe are dropping fast, the quickest since 2021, as the ongoing conflict between Russia and Ukraine continues to escalate.
The situation really heated up after Russia invaded Ukraine in February 2022, which has led to skyrocketing wholesale gas prices and higher energy bills. The UK government even had to step in to help households cope with the rising costs.
Ukraine’s president, Volodymyr Zelenskyy, called the end of the transit deal a major defeat for Moscow in a social media post.
For decades, Russian gas flowed through Ukraine via a pipeline that starts in Sudzha, a town in Russia’s Kursk region, and ends near Uzhhorod, close to Slovakia’s border.
Ukraine’s energy minister, German Galushchenko, labeled this move as historic, marking the end of a crucial energy route from the Soviet era. This forces many European countries to find alternatives to Russian gas.
However, the cutoff has already led to power outages for many in a breakaway region of Moldova.
Slovakia’s prime minister, Robert Fico, who opposed the decision, warned that this supply cut will have a severe impact on the EU, while Russia remains unaffected.
Analysts from Deutsche Bank noted that while prices are still lower than throughout 2022, the recent rise could add to inflationary pressures, especially since European gas storage ended 2024 at its lowest level in three years.