Europe's gas boom! The chain reaction of the Russian-Ukrainian conflict is emerging | Kyo Brewery
author：The Beijing News commented
Europe's gas boom! The chain reaction of the Russian-Ukrainian conflict is emerging | Kyo Brewery
Once the pain of Russia's lack of gas supply is felt, the tone of the chorus of Europe's current sanctions against Russia may become messy.
Europe's gas boom! The chain reaction of the Russian-Ukrainian conflict is emerging | Kyo Brewery
Once the pain of Russia's lack of gas supply is felt, the tone of the chorus of Europe's current sanctions against Russia may become messy.
The escalation of the crisis in Ukraine has exacerbated volatility in the European oil and gas market, which shows oil prices on the screen of a gas station photographed in Frankfurt, Germany, on Feb. 25. Photo: Xinhua News Agency
Text | Xu Lifan
At present, the war between Russia and Ukraine is in full swing, and the EU's posture is getting tougher and tougher. Not only did European Commission President von der Leyen support Ukraine's accession to the European Union, but the European Union also announced the closure of its airspace to Russia and decided to provide Ukraine with a large amount of weapons and equipment, including combat aircraft.
Faced with increasing pressure, Putin has also responded with a tough response – ordering an increase in combat readiness.
The troubling prospect has led to speculation that Europe will encounter an energy crisis – will Europe, which is highly dependent on Russian gas for energy consumption, "run out of gas" due to the Russian-Ukrainian conflict?
Natural gas prices in Europe are rising
There are 21 gas trading hubs in Europe, but the ones with the largest pricing power are the Dutch Ownership Transfer Centre (TTF) and the Intercontinental Exchange in London (ICE). The Dutch TTF is the only benchmark hub on the European continent. This is the result of the Netherlands' geography, infrastructure and government push.
After the start of the War between Russia and Ukraine on February 24, the price of TTF benchmark Dutch natural gas futures surged by 60% intraday and rose 33.3% at the close at 118.5 euros/MWh, or $1.42 (about 8.97 yuan) per cubic meter, reflecting the market's concerns.
On February 28, affected by the increased EU sanctions and the strong reaction from Russia, the price of natural gas futures for April delivery on the London ICE Exchange rose 35.3% to $1.45 per cubic meter in the first minute of opening.
Despite the market's stronger response, contrary to what many predicted, the War between Russia and Ukraine did not lift the price of natural gas in Europe. In mid-February, due to the cold wave and the difficulty of putting the Nord Stream-2 pipeline from Russia to Germany into production, the price of Dutch natural gas futures, the benchmark of the European TTF, rose to an all-time high of 182 euros per MWh, 10 times higher than the price a year ago.
In contrast, although the War between Russia and Ukraine has driven up the price of natural gas in Europe, it is still 34% away from the all-time high.
In fact, after Russia announced on February 25 that its exports to Europe would not be interrupted, the price of TTF benchmark Dutch gas futures fell by 15% at one point.
Europe's gas boom! The chain reaction of the Russian-Ukrainian conflict is emerging | Kyo Brewery
Once the pain of Russia's lack of gas supply is felt, the tone of the chorus of Europe's current sanctions against Russia may become messy.
The escalation of the crisis in Ukraine has exacerbated volatility in the European oil and gas market, which shows oil prices on the screen of a gas station photographed in Frankfurt, Germany, on Feb. 25. Photo: Xinhua News Agency
Text | Xu Lifan
At present, the war between Russia and Ukraine is in full swing, and the EU's posture is getting tougher and tougher. Not only did European Commission President von der Leyen support Ukraine's accession to the European Union, but the European Union also announced the closure of its airspace to Russia and decided to provide Ukraine with a large amount of weapons and equipment, including combat aircraft.
Faced with increasing pressure, Putin has also responded with a tough response – ordering an increase in combat readiness.
The troubling prospect has led to speculation that Europe will encounter an energy crisis – will Europe, which is highly dependent on Russian gas for energy consumption, "run out of gas" due to the Russian-Ukrainian conflict?
Natural gas prices in Europe are rising
There are 21 gas trading hubs in Europe, but the ones with the largest pricing power are the Dutch Ownership Transfer Centre (TTF) and the Intercontinental Exchange in London (ICE). The Dutch TTF is the only benchmark hub on the European continent. This is the result of the Netherlands' geography, infrastructure and government push.
After the start of the War between Russia and Ukraine on February 24, the price of TTF benchmark Dutch natural gas futures surged by 60% intraday and rose 33.3% at the close at 118.5 euros/MWh, or $1.42 (about 8.97 yuan) per cubic meter, reflecting the market's concerns.
On February 28, affected by the increased EU sanctions and the strong reaction from Russia, the price of natural gas futures for April delivery on the London ICE Exchange rose 35.3% to $1.45 per cubic meter in the first minute of opening.
Despite the market's stronger response, contrary to what many predicted, the War between Russia and Ukraine did not lift the price of natural gas in Europe. In mid-February, due to the cold wave and the difficulty of putting the Nord Stream-2 pipeline from Russia to Germany into production, the price of Dutch natural gas futures, the benchmark of the European TTF, rose to an all-time high of 182 euros per MWh, 10 times higher than the price a year ago.
In contrast, although the War between Russia and Ukraine has driven up the price of natural gas in Europe, it is still 34% away from the all-time high.
In fact, after Russia announced on February 25 that its exports to Europe would not be interrupted, the price of TTF benchmark Dutch gas futures fell by 15% at one point.
On February 26, the United States and Europe announced that some Russian banks would be excluded from the SWIFT system. This is the Central Bank of Russia photographed in Moscow, Russia, on February 25. Photo: Xinhua News Agency
The parties had an unexpected tacit understanding of Russian gas
Since the beginning of the war between Russia and Ukraine, all sides have been stopping at harsh words and doing harsh things. However, a closer look can be found that the West has even made such moves as fighter support and sanctions against Putin and Lavrov, and Russia has also fought back strongly and raised the level of combat readiness, but no side has said anything about Russian energy.
The U.S.-led West kicked Russia out of the SWFIT system, but Russian energy deals were not among them. The toughest sanctions in Europe for the Russian energy system are to ban the supply of newer equipment to Russian refineries that can produce better oil products – in fear of rising international energy commodity prices and allowing Russian oil companies to make higher profits. In this sanction against Russia's energy system, Russian gas is still excluded.
So far, the toughest sanctions against Russian gas have come from Germany, which relies on Russian gas for 40%. As early as February 22, two days before the russo-Ukrainian war began, the German SPD-led coalition government froze the approval of the Nord Stream-2 project.
Nord Stream-2 transports 55 billion cubic meters of natural gas per year, enough to supply 26 million European households. Freezing approvals for the project means that the price Europe will pay per cubic meter of gas in the future could reach 14.5 yuan instead of the current 8.97 yuan.
In fact, even Dalip Singer, deputy national security adviser of the United States, said that "we will not do anything that will cause unexpected interference with energy flows." ”
The West has been careful to restrain sanctions on Russian gas, fearing that Europe's economic recovery process will be washed away by the energy crisis. And Russia is now equally restrained and will not really cut off the export of natural gas to Europe. At a time when russia's financial system has suffered a serious blow and the ruble has a credit crisis, maintaining stable gas exports is conducive to Russia's financial stabilization. As a result, on the issue of Russian gas, all parties unexpectedly had a tacit understanding.
Europe's gas boom! The chain reaction of the Russian-Ukrainian conflict is emerging | Kyo Brewery
Once the pain of Russia's lack of gas supply is felt, the tone of the chorus of Europe's current sanctions against Russia may become messy.
The escalation of the crisis in Ukraine has exacerbated volatility in the European oil and gas market, which shows oil prices on the screen of a gas station photographed in Frankfurt, Germany, on Feb. 25. Photo: Xinhua News Agency
Text | Xu Lifan
At present, the war between Russia and Ukraine is in full swing, and the EU's posture is getting tougher and tougher. Not only did European Commission President von der Leyen support Ukraine's accession to the European Union, but the European Union also announced the closure of its airspace to Russia and decided to provide Ukraine with a large amount of weapons and equipment, including combat aircraft.
Faced with increasing pressure, Putin has also responded with a tough response – ordering an increase in combat readiness.
The troubling prospect has led to speculation that Europe will encounter an energy crisis – will Europe, which is highly dependent on Russian gas for energy consumption, "run out of gas" due to the Russian-Ukrainian conflict?
Natural gas prices in Europe are rising
There are 21 gas trading hubs in Europe, but the ones with the largest pricing power are the Dutch Ownership Transfer Centre (TTF) and the Intercontinental Exchange in London (ICE). The Dutch TTF is the only benchmark hub on the European continent. This is the result of the Netherlands' geography, infrastructure and government push.
After the start of the War between Russia and Ukraine on February 24, the price of TTF benchmark Dutch natural gas futures surged by 60% intraday and rose 33.3% at the close at 118.5 euros/MWh, or $1.42 (about 8.97 yuan) per cubic meter, reflecting the market's concerns.
On February 28, affected by the increased EU sanctions and the strong reaction from Russia, the price of natural gas futures for April delivery on the London ICE Exchange rose 35.3% to $1.45 per cubic meter in the first minute of opening.
Despite the market's stronger response, contrary to what many predicted, the War between Russia and Ukraine did not lift the price of natural gas in Europe. In mid-February, due to the cold wave and the difficulty of putting the Nord Stream-2 pipeline from Russia to Germany into production, the price of Dutch natural gas futures, the benchmark of the European TTF, rose to an all-time high of 182 euros per MWh, 10 times higher than the price a year ago.
In contrast, although the War between Russia and Ukraine has driven up the price of natural gas in Europe, it is still 34% away from the all-time high.
In fact, after Russia announced on February 25 that its exports to Europe would not be interrupted, the price of TTF benchmark Dutch gas futures fell by 15% at one point.
On February 26, the United States and Europe announced that some Russian banks would be excluded from the SWIFT system. This is the Central Bank of Russia photographed in Moscow, Russia, on February 25. Photo: Xinhua News Agency
The parties had an unexpected tacit understanding of Russian gas
Since the beginning of the war between Russia and Ukraine, all sides have been stopping at harsh words and doing harsh things. However, a closer look can be found that the West has even made such moves as fighter support and sanctions against Putin and Lavrov, and Russia has also fought back strongly and raised the level of combat readiness, but no side has said anything about Russian energy.
The U.S.-led West kicked Russia out of the SWFIT system, but Russian energy deals were not among them. The toughest sanctions in Europe for the Russian energy system are to ban the supply of newer equipment to Russian refineries that can produce better oil products – in fear of rising international energy commodity prices and allowing Russian oil companies to make higher profits. In this sanction against Russia's energy system, Russian gas is still excluded.
So far, the toughest sanctions against Russian gas have come from Germany, which relies on Russian gas for 40%. As early as February 22, two days before the russo-Ukrainian war began, the German SPD-led coalition government froze the approval of the Nord Stream-2 project.
Nord Stream-2 transports 55 billion cubic meters of natural gas per year, enough to supply 26 million European households. Freezing approvals for the project means that the price Europe will pay per cubic meter of gas in the future could reach 14.5 yuan instead of the current 8.97 yuan.
In fact, even Dalip Singer, deputy national security adviser of the United States, said that "we will not do anything that will cause unexpected interference with energy flows." ”
The West has been careful to restrain sanctions on Russian gas, fearing that Europe's economic recovery process will be washed away by the energy crisis. And Russia is now equally restrained and will not really cut off the export of natural gas to Europe. At a time when russia's financial system has suffered a serious blow and the ruble has a credit crisis, maintaining stable gas exports is conducive to Russia's financial stabilization. As a result, on the issue of Russian gas, all parties unexpectedly had a tacit understanding.
On 28 February, the Russian-Ukrainian delegation began negotiations in the Gomel Oblast of Belarus. Photo: Xinhua News Agency
The risk of "letting Europe "shiver" remains
Although Russia is reluctant to "cut off" Europe, the possibility of making Europe "freeze a little" still exists. Of course, this depends on the direction of the war between Russia and Ukraine, as well as Russia's own analysis of advantages and disadvantages and the timing of the situation.
For example, continuous supply, but reduce the export of natural gas to Europe. The EU now has only 34% of its full gas reserves, and stocks are usually replenished in the summer and autumn. Judging from the current situation, it is almost impossible for Europe to replenish its natural gas reserves.
In this case, the EU has begun to seek alternative sources of natural gas imports, with the main targets being Qatar and the United States. But Qatar's energy ministry has said it is powerless to replace Russia. Indeed, relying on oil tankers to transport liquefied gas to Europe is not as convenient as Russia's gas pipeline. The United States is naturally happy to make a fortune, but there are also technical obstacles that are too far away.
To this end, Germany has announced that it will seek more coal imports to make up for the shortfall. The EUROPEAN Union, which has always been a more environmentally aggressive region, now has to increase its dependence on coal.
While we look at Germany, France, Italy, the big European countries that need Russian gas, we should also look at other European countries that are more dependent on Russian gas. According to the Economic Commission for Europe, from Slovenia, the Czech Republic, Finland and Hungary, there are more than a dozen European countries that rely on Gazprom for more than 50%.
So, there is a real possibility that once the pain of Russia's lack of gas supply is felt, the tone of the chorus of Europe's current sanctions against Russia will become messy.
Beijing News special writer | Xu Lifan (Columnist)
