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Persistent tensions between Russia and Ukraine drives up European gas prices
June 17, 2014 6:04 amVideo
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With the possibility of Russia closing gas pipelines passing through Ukraine and simultaneously threatening supplies in Europe, natural gas in the region has gone up significantly in value.
July contracts for ICE UK gas has climbed as high as 9% behind formerly bearish investors’ activity of repositioning themselves for the upward price change. The highest gains were in the prices for winter delivery when it peaked at 63.5 pence per therm due to the possibility of shortage. Contracts for futures of the benchmark eventually settled on a 1.8% gain to trade at 42.61 pence for each therm.
Russia’s recent moves follows a dispute over debt with Ukrainian capital city Kiev. These developments, however, affect far more than just the two countries with Russia accounting for almost a third of Europe’s gas demand, half of which goes through Ukraine. Five years ago, a similar sudden cut off in supply was done by Russia leading to major disruptions in the continent as Ukraine siphoned off the Europe headed gas.
While Russia has so far only cut supplies meant directly for Kiev, some analysts believe that if pipelines to Europe end up being closed, the impact will not be as great as it was before. A big factor in this line of thinking is the unusually record high gas stockpiles Europe currently has in the amount of 52 billion cubic meters and the addition of the Nord Stream as an alternate route for Russian sourced gas.
Natural gas has dropped in price severely this year, nearly by 40%, due to healthy European inventories. This provides a valuable backdrop for the sudden price increase with the possibility that prices have simply bottomed out, according to analysts at Societe Generale.
The material has been provided by InstaForex Company – www.instaforex.com
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