Natural gas rates in Europe dive after Ukraine blocks Russian streams

KYIV, UKRAINE: Director General of Gas Transmission System Operator of Ukraine LLC (GTSOU) Serhiy Makogon. GTSOU will obstruct Russian gas streams through 2 crucial entry points in Russian-inhabited area from Wednesday, May 11, 2022.

Yuliia Ovsiannikova/ Ukrinform/Future Publishing through Getty Images

European gas rates leapt after Ukraine’s state-owned grid operator suspended Russian streams through a crucial entry point.

Gas TSO of Ukraine on Tuesday revealed force majeure – unforeseeable scenarios that avoid the fulfilment of an agreement – the very first statement of its kind given that Russia gotten into Ukraine on Feb. 24. It stated it would decline circulations through its Sokhranivka entry point, which provides Russian gas to Europe, from Wednesday.

The operator has actually likewise obstructed gas transportation through its border compressor station Novopskov, through which practically a 3rd of gas (as much as 32.6 million cubic meters each day) from Russia to Europe is moved.

TTF European gas rates were up more than 6.4% by around 9:15 a.m. London time on Wednesday, according to Refinitiv information.

Both the Sokhranivka gas metering station and Novopskov are positioned in Russian-inhabited locations of eastern Ukraine, and GTSOU blamed “the actions of the occupiers” for the disturbance to gas transit.

“As a result of the Russian Federation’s military aggression against Ukraine, several GTS facilities are located in territory temporarily controlled by Russian troops and the occupation administration,” GTSOU stated in a declaration.

“Currently, GTSOU cannot carry out operational and technological control over the CS ‘Novopskov’ and other assets located in these territories. Moreover, the interference of the occupying forces in technical processes and changes in the modes of operation of GTS facilities, including unauthorized gas offtakes from the gas transit flows, endangered the stability and safety of the entire Ukrainian gas transportation system.”

The operator stated it would still have the ability to meet its transit responsibilities to European partners by rerouting gas to the Sudzha affiliation point, which lies in Ukrainian-managed area.

“The company repeatedly informed Gazprom about gas transit threats due to the actions of the Russian-controlled occupation forces and stressed stopping interference in the operation of the facilities, but these appeals were ignored,” GTSOU included.

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Sergei Kupriyanov, a spokesperson for Gazprom, stated Ukraine’s demand would be “technologically impossible” which the business sees no premises for the choice, the Associated Press reported.

Timothy Ash, senior EM sovereign strategist at BlueBay Asset Management, stated in an e-mail Wednesday that he was amazed that Ukraine had not cut gas and energy transit previously, in the lack of an energy blockade being enforced by Europe.

“Russia is itself hitting Ukrainian fuel depots and supplies, so maybe this is a Ukrainian response to that,” he included.

The hazard of Russia cutting off gas streams to Europe has actually triggered the European Union to increase its look for alternative providers, with Russia accounting for around 40% of all EU gas imports.

Economists and traders have actually alerted that a full-blown energy blockade might have alarming ramifications for prices and inflation, with experienced gas trader Bill Perkins informing CNBC in April that such a relocation might set off “catastrophic pricing” this winter season.


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