Natural gas prices in Europe have risen since Ukraine cut off Russian flows

KYIV, Ukraine: Director General of Gas Transmission System Operator of Ukraine LLC (GTSOU) Serhiy Makogon. GTSOU will block Russian gas flows through two main entrances to the Russian-occupied territory from Wednesday, May 11, 2022.

Future Publishing via Yuliia Ovsiannikova / Ukrinform / Getty Images

European natural gas prices have risen after Ukraine’s state-owned grid operator suspended Russian flows through a key entry point.

Ukraine’s Gas TSO on Tuesday announced the use of force – an unforeseen circumstance that prevented an agreement from being fulfilled – the first of its kind since Russia invaded Ukraine on February 24. Russia’s gas in Europe from Wednesday.

The operator also blocked gas transport through its border compression station Novoposkov, through which about one-third of the gas (up to 32.6 million cubic meters per day) is transported from Russia to Europe.

TTF European natural gas prices rose more than 6.4% as of 9:15 a.m. London time on Wednesday, according to referential data.

Both the Sokhranivka gas metering station and Novopskov are located in the Russian-occupied territory of eastern Ukraine, and GTSOU has blamed “occupiers’ activities” for disrupting gas transport.

“As a result of the Russian Federation’s military aggression against Ukraine, a number of GTS facilities are temporarily located in areas controlled by the Russian military and the occupying administration,” the GTSU said in a statement.

“Currently, the GTSOU cannot exercise operational and technical control over CS ‘Novopskov’ and other resources located in these regions. Endangers stability and security. “

The operator said it would still be able to meet its transit obligations to European partners by re-routing gas at the Sudja interconnection point in the Ukrainian-controlled territory.

GTSOU added, “The company repeatedly informed Gazprom of the gas transit threat due to the activities of the Russian-controlled occupying forces and insisted on stop interfering in the operation of the facilities, but these requests were ignored,” GTSOU added.

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The Associated Press reports that Gazprom spokesman Sergei Kuprianov said Ukraine’s request would be “technically impossible” and that the agency saw no basis for the decision.

Timothy Ash, a senior EM sovereign strategist at Asset Management in Blue, said in an email on Wednesday that he was surprised that Ukraine had not cut off gas and energy transit in the absence of a previous energy embargo by Europe.

“Russia itself is hitting Ukrainian fuel depots and supplies, so this is probably a Ukrainian response to it,” he added.

Russia’s threat to cut off natural gas flows to Europe has prompted the European Union to step up its search for alternative suppliers, with Russia responsible for about 40% of all EU natural gas imports.

Economists and traders have warned that a full-blown energy embargo could have a devastating effect on prices and inflation, with veteran natural gas trader Bill Perkins telling CNBC in April that such a move could trigger “catastrophic pricing” this winter.

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