European natural gas contracts sharply increased following Russian President Vladimir Putin's statements about selling his country's oil and gas to Europe in rubles, claiming that the dollar is no longer a reliable currency for transactions. His remarks raised concerns among traders in the European gas futures market, which recorded an 18% rise on Wednesday and continued to increase by 5.1% during Thursday's mid-session trading.
Putin's statements came as the United States and the European Union edged closer to an agreement to reduce reliance on energy from Moscow, according to Bloomberg, as reported by Arabia.net. European buyers are worried that the Russian demand could lead to disputes and negotiations over contracts, threatening a smooth flow of gas. This could also impact Russia's revenues until new deals are established.
The Russian move increases the risks of a U.S.-led plan to wean Europe off Russian supplies following its invasion of Ukraine, as U.S. National Security Advisor Jake Sullivan stated on Wednesday that an agreement between the Biden administration and the EU could be announced as soon as Friday.
For its part, Goldman Sachs indicated that the deal would likely involve redirected flows of U.S. liquefied natural gas to Europe, which would help Europe replenish its gas stocks to comfortable levels before next winter, unless Russian gas flows are disrupted by Putin's ruble demand.
Futures contracts for next month’s gas delivery rose by 3.9% to €121.60 per megawatt-hour at 10:08 AM in Amsterdam, while UK equivalent futures increased by 4.3% to 289.46 pence per million British thermal units.
