European gas prices spike as Putin seeks payment in roubles                

Russia will continue to 'supply natural gas in accordance with volumes and prices... fixed in previously concluded contracts' and 'changes will only affect the currency of payment', the Russian president said

Russian president Vladimir Putin  said Russia would start selling gas to 'unfriendly' countries in roubles. Picture: Ramil Sitdikov/Sputnik Pool Photo via AP

British and Dutch wholesale gas prices leapt after Russia said it would start selling gas to "unfriendly" countries in roubles, while the EU proposed legislation on minimum gas storage levels.

The spike came after President Vladimir Putin said Russia would start selling gas to "unfriendly" countries in roubles, with the British price for day-ahead delivery jumping by 18% to 259.50 pence per therm, while the winter 2022 price rose by 11% to 264.01 per therm.

In the Dutch gas market, the front-month contract was 15% higher at €114 per megawatt hour while the price for the second quarter jumped by 16% to €113.65 per MWh.

"Russia will continue, of course, to supply natural gas in accordance with volumes and prices... fixed in previously concluded contracts," President Putin said during a televised meeting with top government ministers.

"The changes will only affect the currency of payment, which will be changed to Russian roubles," he said.

As of late January, Gazprom's sales of natural gas to Europe and other countries were primarily settled in euros, at about 58%.

European governments were not immediately available to comment on the Russian announcement.

Gas storage

Separately, the European Commission proposed legislation requiring EU countries to fill their gas storage to at least 90% by November each year from 2023, and 80% this year.

That move will need approval from EU countries and the European Parliament and traders said the target will be tough to meet even in periods when demand is lower. 

In the European carbon market, the benchmark contract was 3.4% lower at €77.90 a tonne. 

"I think you will see record backwardation and you will see $150 a barrel this summer," Trafigura's Ben Luckock told the FT Commodities Global Summit, referring to a market structure where front month prices are higher than for following months - which can signal tight supplies. 

Mr Luckock added prices north of $200 were also possible.

"You'll know at the end of April what the total loss of Russian oil is," he said. 

• Reuters