Europe Gas Swings With Uncertainty on Ukraine Flows After Blast

(Bloomberg) -- European natural gas fluctuated as traders sought clarity on shipments after reports about damage to a pipeline in Russia. 

There was an explosion at a link that feeds a major route crossing Ukraine and into the European Union, Russia’s RBC news outlet reported. Benchmark futures initially surged, before giving up most of the gains as the market assumed transit flows continued.

“The pipeline blast is getting some attention,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.

The Dutch front-month gas contract, a benchmark for Europe, was 1.3% higher at €109.99 a megawatt-hour as of 1:41 p.m. in Amsterdam. It rose as much as 6.6% after the report about the explosion.  

Russia has progressively cut flows to Europe through other major links following its war in Ukraine, and in retaliation for Western sanctions targeting President Vladimir Putin’s regime. Even with fuller-than-normal inventories providing some buffer, Europe is still vulnerable to sever cold snaps or prolonged supply disruptions. 

Still, ample supplies of liquefied natural gas — coupled with warmer weather this week — are helping to keep prices in check. Traders are also weighing the impact of planned price caps in the region next year, with many industry watchers seeing both bearish and potentially bullish drivers from the move. 

Read more: Gas Price Cap Would Have Prevented Record Summer Spikes

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