As Time Passes, and the Weather Warms, Putin’s Power Play in Europe Loses Force

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Vladimir Putin’s move to cut off natural-gas shipments to Poland and Bulgaria after they refused to pay in rubles is a big deal. The price of European natural gas spiked as much as 24% after the news, only to fall back near its prior levels by the next day.

Putin still has power over European energy, but it has declined since the Ukraine war began. Last year, 40% of European gas came from Russia. Natural gas is particularly crucial in winter for heating homes. In early March, Dutch-traded gas futures spiked above 200 euros ($210) per megawatt hour. On Wednesday, they traded at €107.

Why isn’t the shut-off causing a bigger spike? First, gas demand has fallen as the weather has warmed. If Putin had cut off gas in February, the impact would have been larger. Second, Poland and Bulgaria aren’t Russia’s biggest customers. Germany, Italy, and Turkey import much more Russian gas by volume; cutting them off would inflict real pain on Europe—and squeeze Russian revenue. “A full interruption of Russian flows to Germany would potentially lift European gas prices to over €200 per megawatt hour this summer,” says Goldman Sachs analyst Samantha Dart.

Third, Europe is better prepared than it was two months ago. Europe has found new sources of gas, including a new pipeline expected to open between Norway and Poland this fall. And U.S. shipments of liquefied natural gas, or LNG, have helped some European Union countries refill storage tanks for next winter. The U.S. plans to ship over 60% more LNG to Europe in 2022 than it did in 2021.

Next Week

Monday 5/2

Arista Networks
,
Clorox,

Coterra Energy
,

Devon Energy
,

Expedia Group
,
Moody’s,

NXP Semiconductors
,

SolarEdge Technologies
,
and

Williams

Cos. report quarterly results.

The Institute for Supply Management releases its Manufacturing Purchasing Managers’ Index for April. Consensus estimate is for a 57.7 reading, roughly even with the March data.

Tuesday 5/3

Advanced Micro Devices
,

Airbnb
,

American International Group
,

Biogen
,

BP
,
Cummins,

DuPont
,

Estée Lauder
,

Marathon Petroleum
,

Martin Marietta Materials
,

Molson Coors Beverage
,

Paramount Global
,

Pfizer
,
S&P Global, and

Starbucks

announce earnings.

The Bureau of Labor Statistics releases the Job Openings and Labor Turnover Survey. Economists forecast 11.4 million job openings on the last business day for March, 134,000 more than in February.

Wednesday 5/4

ADP releases its National Employment Report for April. Economists forecast that the economy added 350,000 private-sector jobs, after a 455,000 rise in March. The total workforce has passed prepandemic levels.

AmerisourceBergen
,
APA,

Booking Holdings
,

CF Industries
,
Corteva,

CVS Health
,

eBay
,

Equinor
,

Etsy
,

Fortinet
,
Moderna,

Novo Nordisk
,

Pioneer Natural Resources
,

Regeneron Pharmaceuticals
,

Trane Technologies
,

Uber Technologies
,
and

Yum! Brands

release quarterly results.

The Federal Open Market Committee announces its monetary-policy decision. The FOMC is widely expected to raise the federal-funds rate by half a percentage point to 0.75%-1%. The current Wall Street consensus calls for the federal-funds rate to be at 3%-3.25% by the end of this year, as a hawkish Fed tries to catch up in its fight against the highest inflation readings in four decades.

The ISM releases its Services Purchasing Managers’ Index for April. Expectations are for a 58.5 reading, slightly ahead of March’s 58.3 figure, and well above the 50 level, which indicates growth in the services sector.

Thursday 5/5

Air Products & Chemicals
,

Anheuser-Busch InBev
,
Aptiv,

Becton Dickinson
,

Cardinal Health
,

ConocoPhillips
,

Illumina
,

Intercontinental Exchange
,
Kellogg,

McKesson
,

Metlife
,

Royal Caribbean Group
,

Sempra Energy
,

Shell
,

Vertex Pharmaceuticals
,
and

Zoetis

hold conference calls to discuss earnings.

Friday 5/6

Cigna
,

Enbridge
,

NRG Energy
,
and Under Armour report quarterly results.

The BLS releases the jobs report for April. Economists forecast a gain of 375,000 jobs in nonfarm payrolls, compared with an increase of 431,000 in March. The unemployment rate is expected to remain unchanged at 3.6%, near historical lows. The labor market remains tight, as job openings continues to outpace job seekers.

Write to Avi Salzman at avi.salzman@barrons.com