European gas prices jump over fears Russia stops supplying Poland

Refugees at the border crossing in Medyka, south-eastern Poland, earlier this month. Picture: AP/Sergei Grits

The prices of European wholesale gas jumped following reports Russia has halted deliveries to Poland.

Flows have stopped under the Yamal contract, Onet website reported, citing Polish government sources it didn’t name. Onet says it has also confirmed the news at Poland’s dominant gas company.

Benchmark futures increased as much as 17% to €108.45 per megawatt-hour. They traded 6.4% higher at €98.75 late on Tuesday evening. 

The market continues to be driven by supply concerns following Russia’s invasion of Ukraine. Since the start of the war, Europe has been looking for alternative energy sources and LNG has been the lifeline, limiting bigger spikes.

Russia’s demand to be paid in roubles for its gas is yet to resolved. 

While president Vladimir Putin warned gas flows could be cut if the terms are not met, the EU has said the mechanism violates existing sanctions and suggested companies can keep paying for gas in euros.

Flows from via Ukraine from Russia — the continent’s largest supplier — are far below levels seen earlier in April.

Shipments from Norway are about 10% lower than last month’s average due to maintenance, according to nominations from operator Gassco.

Low wind-power output

Low wind-power output is expected in parts of Europe this week and next, according to forecasters. 

That could boost the need for gas for electricity. UK gas power generation was at 60% of its total early on Tuesday, while wind output was at 8%, according to grid data.

Below-average temperatures are expected across most of Europe next week, with milder weather limited to most of the western region, Maxar said in a daily report.

North-West Europe’s imports of liquefied natural gas are on course to match the record levels seen in January, with at least a dozen new cargoes expected by the end of April. 

Meanwhile, global oil prices rebounded in volatile trading as the market weighed concerns over Russian supply and Chinese demand. Brent crude futures rose $1.26, or 1.2%, to $103.58 a barrel. 

This comes after crude oil had fallen earlier in the week, pressured by concerns over demand in China, the world's largest crude oil importer.

Chinese capital Beijing has expanded its Covid-19 mass testing to much of the city of nearly 22m as the population braces for a lockdown similar to Shanghai's stringent curbs. But Brent crude rose after the People's Bank of China said it would step up monetary policy support to the domestic economy. 

• Bloomberg and Reuters