(Bloomberg) -- European natural gas prices advanced for a third day, with little over a week left until the expiry of a key pipeline transit deal between Russia and Ukraine.
Prices rose as much as 1.6% on Monday, following a 7% jump last week, as signals emerged from political leaders that the continuation of flows across Ukraine looks increasingly unlikely beyond Dec. 31.
The gas from Russia remains the most affordable option in a number of central European nations. But Ukraine said last week it won’t agree to alternatives that result in transiting Russian gas.
The situation of Russian gas supplies to Europe after the end of the transit deal with Ukraine is “complicated” and “requires increased attention,” Interfax reported, citing Kremlin spokesman Dmitry Peskov on Monday.
In a rare visit to Moscow by a European leader on Sunday, Slovak Prime Minister Robert Fico discussed the looming end of the deal with Russian President Vladimir Putin. Fico said Putin confirmed that Russia was ready to continue delivering gas to the West via Ukraine, but this would be “practically impossible” after Jan. 1 given Kyiv’s stance.
Putin Meets Slovakia’s Fico in Moscow Before Gas Deal Expiry (2)
Ukrainian President Volodymyr Zelenskiy last week indicated his country won’t transit Russian-origin gas unless he has assurances the Kremlin won’t benefit financially while the war continues.
The loss of the transit deal would mean Slovakia and other countries that are still getting the Russian fuel via Ukraine — mainly Czech Republic, Austria and Italy — would have to use costlier alternatives such as liquefied natural gas. While meeting only a fraction of European gas needs now, the abrupt halt of the Ukraine route could still lead to price gains next month.
Europe Braces for Tense Countdown to Ukraine Gas Flow Halt (1)
Storage levels across Europe are at lower levels than last year, which would make it more challenging to refill inventories next summer.
In addition, largely windless weather is forecast in northwest Europe by the end of this week, which may boost demand for gas as a power-generation fuel. At the same time, mild weather is expected until the end of December, with some cooler days at the beginning of the next month.
Dutch front-month futures, Europe’s gas benchmark, rose 1.2% to 44.67 a megawatt-hour as of 11:13 a.m. in Amsterdam.
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