European natural gas prices rose ahead of the expiration of the transit agreement between Russia and Ukraine at the end of 2024, raising fears of supply disruptions and higher prices.
According to a report published by Bloomberg, gas prices for delivery in February jumped by up to 2.8% on Tuesday, reflecting tensions resulting from the imminent expiration of the 5-year agreement.
Political tensions
The agreement to transit Russian gas to Europe via Ukraine is scheduled to expire on December 31, 2024, without any new arrangement to ensure continued supplies.
Ukrainian President Volodymyr Zelensky rejected any agreement that could lead to the flow of Russian gas and Russia benefiting financially, which added to the uncertainty.
Supplies via Ukraine represent about 5% of total European gas demand. However, the tensions have caused price volatility, with futures rising by 51% through 2024.
Cold weather and lack of supplies
The expiration of the agreement coincided with the expectation of a bout of cold weather in January, increasing pressure on European gas reserves that are being depleted faster than usual.
Slovakia, which relies heavily on these supplies, has expressed concern, with Prime Minister Robert Fico threatening to cut off electricity supplies to Ukraine if gas shipments stop.
Despite the concerns, some experts indicated that Europe is prepared to deal with the expected stoppage. Dmytro Sakharok, CEO of the Ukrainian D-Trading Company, stated that the commercial and technical impact of the expiration of the agreement is limited, as the quantities flowing through Ukraine are not sufficient to cause a significant shortage in the regional market.
In Germany, the head of the Federal Network Agency, Klaus Müller, confirmed that the country is prepared for the next three months, as he explained that gas consumption has increased, but with noticeable savings.
He said in an interview with the “Fank” media group: “It is still beneficial to provide gas to reduce the financial burden on families.”
High prices
Gas prices in the Netherlands, the European benchmark, rose 1.6% to 48.63 euros (about $50) per megawatt-hour, reflecting ongoing tensions in the market as the end of the contract approaches.
This development – according to Bloomberg – indicates continued fluctuations in the European energy market as a result of political and geographical factors. As Europe prepares to face the challenges, tensions between Russia and Ukraine remain a major source of pressure on energy markets.
