European gas prices stay elevated as Ukraine tensions hot up again

The price of European wholesale gas remained at elevated levels as hopes cooled for an early diplomatic breakthrough in the Ukraine crisis.

The price of European wholesale gas remained at elevated levels as hopes cooled for an early diplomatic breakthrough in the Ukraine crisis.

Wholesale gas prices are a key gauge to whether tensions are rising or receding between Russia and the West over Ukraine.

Gas prices retreated by up to 3% but are at historically elevated levels. The price of gas for delivery in June traded at around €80 par megawatt hour. And European stock markets fell sharply.  

The Dax stock market index in Frankfurt and the Cac-40 in Paris fell by up to 2%, while the Ftse-100 in London closed about 0.5% lower.                            "[Stock] investors are still determined to keep selling it seems, weighed down by concerns about the impact of a Russia-Ukraine conflict,” said Chris Beauchamp, chief market analyst at online trader IG, as "hopes of a Ukraine resolution fade“. 

US markets were thinned on Monday for the Presidents' Day holiday. In Ireland, the Iseq retreated by 1.6%, led by the heavyweights, AIB, Bank of Ireland, Ryanair, and Smurfit Kappa. The price of oil - Russia's main export - rose, while Russian shares and the rouble plunged.

Brent crude jumped by 1.3% to $94.77 a barrel. 

French President Emmanuel Macron had said earlier on Monday that US President Joe Biden and President Putin had agreed in principle to a summit over Ukraine, but the Kremlin said there were no immediate plans for a meeting. With no set date for a summit, stock markets then turned lower.

Russian President Vladimir Putin said he would decide on a request by two regions of eastern Ukraine held by Russian-backed separatists to be recognised as independent - a move that could give Moscow a reason to openly send troops. 

Separately, Moscow said Ukrainian military saboteurs had tried to enter Russian territory in armed vehicles leading to five deaths, an accusation dismissed as "fake news" by Kyiv.

Washington says Russia has now massed a force numbering 169,000-190,000 troops in the region, including pro-Russian rebels in eastern Ukraine. Russia denies any plan to attack its neighbour but has avowed that Ukraine will never join Nato.  

On the outlook for the oil price, the chief executive officer of Vitol Group, the world’s biggest independent oil trader, said in an interview that prices could surpass $100 a barrel for a sustained period.

“Demand is going to surge in the second half” and exceed 100 million barrels a day if travel continues to return to normal, Vitol CEO Russell Hardy said. 

“Eventually we’re going to run out of spare capacity,” he said. 

“The concern is that if tension in Eastern Europe escalates further that some of this supply might get disrupted intentionally or driven by political divisions,” affecting not only energy but other commodities, said Giovanni Staunovo, a commodity analyst at UBS. "I would expect the market to continue to react in a sensitive way.” 

Additional reporting Reuters and Bloomberg