European Gas Prices Plunge to Lowest Since Start of Ukraine War

(Bloomberg) — European natural gas prices slumped to the lowest since the start of the war in Ukraine, with the Easter holidays approaching and Russian President Vladimir Putin remaining largely silent on a potential halt to European gas supplies.

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Benchmark Dutch front-month gas futures dropped as much as 17% to 87.19 euros per megawatt-hour, the lowest intraday level since Feb. 23 — the day before Russia invaded Ukraine. Trading and demand also typically slide ahead of the holidays.

“Energy demand is down, with no seeming rush to bridge the Easter weekend quell of trading,” said Tim Partridge, head of energy trading at DB Group Europe.

Orders for gas transit via Ukraine increased for Thursday after declines earlier this week, while the end to some outages in Norway also boosted deliveries.

Still, the market remains intensely focused on supplies from Russia, with the war grinding on and Putin demanding payment for his country’s gas supplies in rubles. Russia is the European Union’s largest gas provider, and Moscow has previously threatened to halt shipments to buyers that don’t comply with the edict.

“A reasonable replacement for Europe simply does not exist,” Putin said in a televised speech Thursday, while opening a meeting on current challenges for Russia’s energy business. “There are simply no spare volumes in the global market, and deliveries from other countries, primarily the U.S., which may be sent to Europe, will cost the consumers many times more.”

Read More: Putin Says Europe Has No Immediate Alternative to Russian Gas

At the meeting, Putin didn’t reiterate his warnings of any potential cutoffs, but he said his government sees “issues with payments for Russian export energy supplies, as banks from the unfriendly states delay money transfers.” He didn’t elaborate.

The EU has said Putin’s demand for payment in rubles would violate sanctions imposed on Moscow following the invasion of Ukraine. The European Commission, the bloc’s executive arm, has presented its analysis of the decree, finding that it would hand control over transactions to Russia, according to a person familiar with the matter.

The decree stipulates that European gas buyers open two accounts, one in a foreign currency and one in rubles. Customers pay in the foreign currency, which Gazprombank then converts into rubles and transfers the ruble payment to exporter Gazprom PJSC.

Read: EU Warns Putin’s Rubles-for-Gas Demand Would Breach Sanctions

Most payments for April shipments — which have to meet the new demands — are due next month, Russian Deputy Prime Minister Alexander Novak said last week.

While some buyers may decide that the new procedure is consistent with their contracts, others may say that it “goes beyond their contractual obligations and refuse to follow it until and unless their contracts are adjusted,” said Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies.

“Should the adjustment not be made by the next payment date, there will be a very real risk of supplies being cut,” she added.

Benchmark European gas futures settled 9.2% lower at 95.62 euros a megawatt-hour. The equivalent U.K. contract plunged as much as 25% and closed 17% down. The U.K. day-ahead gas price fell 45% to the lowest since August, according to broker data.