(Bloomberg) -- European natural gas prices posted their biggest gain in a month as the European Union repeated it has no interest in continued flows from Russia via Ukraine, following a public plea for support from a group of key companies from central Europe.
Benchmark futures rose 4.4% on Tuesday after the European Commission said it’s prepared for the end of the transit deal between Ukraine and Russia at the end of this year, echoing previous comments it has made about the looming end of the agreement.
Time is running out to avoid an interruption of supplies through Ukraine before the current deal expires at the end of the year, and buyers are now stepping up pressure on the EU to get behind a solution.
While Europe as a whole moved to reduce dependency on Russian gas, landlocked nations in the eastern portion of the bloc still depend on cheaper Russian supplies. A shutoff would threaten to drive up prices and increase competition for remaining supplies at a time when storage levels are unusually low for this time of year.
Slovakia’s SPP and its gas network operator, Eustream AS, as well as Hungary’s MOL Hungarian Oil and Gas Plc and MVM Zrt are among companies that have signed a declaration supporting continuation of the transit. Signatories also include trade associations and large industrial customers from Hungary, Austria, Italy and Slovakia, according to an SPP statement.
“We will present the declaration to the President of the European Commission, Ursula von der Leyen, so that she has first-hand information about the threat to energy and economic security in our region,” SPP Chairman of the Board and Chief Executive Officer Vojtech Ferencz said.
The move puts pressure on the commission, the EU’s executive, to support continued use of Russian gas at the same time as it seeks to phase out reliance on Moscow. The crucial question will be whether Russia and Ukraine can agree terms that are acceptable to both sides as tensions deepen.
The EU executive on Tuesday echoed previous statements it has made publicly.
No Interest
“The Commission has no interest in the continuation of Russian gas transit via Ukraine,” it said via email. “The EU is prepared for the end of the transit and alternatives are in place.”
European natural gas prices jumped on the comments. The region’s front-month contract closed 4.4% higher in Amsterdam, the biggest gain since Nov. 14.
Slovakia, the biggest remaining buyer of Russian gas from the Ukraine route, has been leading efforts to aggregate support for continued transit. The nation aims to have a deal by the end of the year as talks are under way with several partners who would be able to deliver and transit the fuel, Slovakian Deputy Prime Minister and Economy Minister Denisa Sakova said Monday.
On Tuesday, she met with Gazprom PJSC chief Alexey Miller to follow up on discussions held last week on supplies to Slovakia and onward to Europe, Slovak economy ministry said.
The volume being discussed is 15 billion cubic meters a year, the amount that currently moves along Ukrainian pipelines. European gas prices have been volatile amid tight supplies, leaving the market vulnerable to any potential disruption in flows.
The “continuation of gas supply from the Ukrainian side will contribute to keeping gas prices low and help support the competitiveness of industries,” the companies said in their joint declaration.
The region may “suffer significant economic damage in the near future” without the transit deal, SPP said in its statement, noting that a halt in flows would cost Slovakia more than €220 million ($231 million) to purchase and transit gas from another source.
For Ukraine, the ceased transit would “lead to irreversible damage to the Ukrainian gas infrastructure,” it added.
However, the commission has said the end of gas flows through Ukraine will have a “negligible” impact on European gas prices, noting that the end of the transit deal has already been priced into the region’s markets.
While Europe as a whole moved to reduce dependency on Russian gas, landlocked nations in the eastern portion of the bloc depend on cheaper Russian supplies, as alternatives such as liquefied natural gas imports via Germany would be costly.
Read: LNG Can Replace Russian Pipeline Gas at High Cost: Energy Daily
“The interruption of natural gas supplies through Ukraine will naturally also result in an increase in its prices on the markets,” SPP’s Ferencz said in the statement . “In addition, if a cold winter comes, this situation can cause a shortage of gas and problems with its supplies throughout Europe.”
Ukraine, meanwhile, is open for potential talks with the Commission to transit any gas that doesn’t come from Russia if the EU requests it, Ukrainian Prime Minister Denys Shmyhal said Monday.
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