SHANGHAI, Mar 4 - European gas futures prices hit another record high on Thursday against the backdrop of the Russia-Ukraine conflict, with the Dutch TTF benchmark gas futures price rising by 20% to €198 per megawatt hour at one point.
Although the Western world has not yet imposed sanctions on Russia's energy sector, traders and transporters are avoiding dealing with Russian gas suppliers, including Gazprom's energy trading department.
According to the media, sources say that gas and electricity traders are abolishing their new agreements with Gazprom. The bigger risk is that traders may cancel contracts previously agreed with Gazprom or that clearing houses decide to stop doing business with the Russian companies and liquidate their positions.
But for the moment, Russian gas is still being piped to Europe, including those through Ukraine, and the amount of gas being transported through these pipelines has even increased since the conflict escalated last week.
Tom Marzec-Manser, head of gas analysis at ICIS in London, said the market may be repositioning itself and that participants are unwinding short to medium-term contracts with Gazprom and its affiliates wherever possible.
If Europe were to stop trading with Gazprom, it would inevitably have an impact on the energy market. According to Gazprom's annual report, the company supplies gas to more than 177,000 industrial and commercial sites in the UK in 2020 and it also has gas transportation agreements with France and the Netherlands.
Europe relies on Russia for about 1/3 of its gas and a disruption to Russian gas could lift the gas prices to sky-high.
It is worth noting that Europe has imported more liquefied natural gas (LNG) this year than in previous years, and while importing LNG may help reduce the continent's dependence on Russian gas, the problem is that European buyers will face competition from Asian buyers, who will also start restocking in the summer.
