Europe Gas Prices Halt Decline as Ruble-Payment Dilemma Lingers

  • In Business
  • 2022-05-17 17:07:56Z
  • By Bloomberg

(Bloomberg) -- Natural gas prices halted two days of losses, following signals from the European Union that payment for Russian supplies in rubles would constitute a breach of sanctions.

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Benchmark Dutch front-month futures settled 1.4% higher at 94.18 euros per megawatt-hour after fluctuating between larger gains and losses earlier in the day. The UK equivalent rose 7.5%.

Mixed signals have emerged from Brussels in recent days over the payment issue. Russia, the EU's biggest provider, has demanded that supplies be purchased in rubles, via a system that allows for currency to be converted from euros or dollars. But European companies have worried that doing so might violate sanctions imposed on Russia following its invasion of Ukraine.

The EU has issued two sets of guidance on the matter, both of which leave room for interpretation. For now, some gas giants including Italy's Eni SpA and Germany's Uniper SE have they expect to keep buying from Russia.

Read More: EU Gas Firms Set to Keep Buying From Russia After Standoff

The European Commission, the bloc's executive arm, so far hasn't issued anything in writing that explicitly prevents companies from paying Russia's Gazprom PJSC in a way that the company deems satisfactory. But commission spokesman Eric Mamer on Tuesday said opening an account in rubles would go beyond the EU's recommendations.

Meanwhile, the bills for Russian fuel are coming due.

Eni plans to open accounts in rubles and euros with Gazprombank by Wednesday so that it can make payments on time this month and avoid any risks to gas supplies, according to people familiar with the situation.

Uniper will pay for gas in euros to a Gazprombank account, which will ensure "timely fulfillment of the contract" on the company's part, a spokesman said on Tuesday. The utility said it remains in "close exchange" with the German government on the payment procedure.

Russia has already cut gas flows to Poland and Bulgaria over the payment issue, and last week shipments through Ukraine were curbed amid fighting in the eastern part of the country.

Supplies via Ukraine were set to remain muted on Tuesday. Flows through the Nord Stream pipeline to Germany, the biggest link delivering Russian gas to the EU, were expected to remain stable, near full capacity.

European gas prices have fallen in recent days amid warmer weather and rising storage levels. Shipments of liquefied natural gas have also arrived in the region as the EU moves to reduce its dependency on Russia.

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©2022 Bloomberg L.P.


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