After a tumultuous end to the gas markets last week, we saw some respite yesterday. Last week news broke that OMV, Austria’s energy company won an arbitration award of €230 million in connection with irregular German gas supplies from Gazprom in 2022 and stated it would stop paying Gazprom Export under its long-term contract to recover the amount. Gazprom consequently announced on Friday afternoon that gas flows would be cut from Saturday, causing the markets to rally to new 2024 highs. The market continues to show extreme sensitivity regarding supply reductions. However, since Saturday data continues to show Russian gas exports to Europe via Ukraine are stable, with nominations for flows to Austria from Slovakia also unchanged. All that appears to have changed is the buyer. The volumes are now finding new buyers or middlemen in Europe who stepped in to snap up unsold gas, companies and sources said. The gains were gradually pared back as the reality dawned that no disruption was forthcoming.
Looking at the fundamentals, with prices being close to 2024 highs, the UK has attracted more LNG cargoes with ships being diverted from Asia. The colder temperatures which were the cause of the rally are soon to improve including wind generation giving way to an improved fundamental picture. However, the escalating hostilities in the Ukraine war continues to provide additional risk premium to the market with volatility here to stay.
