European natural gas traders are playing down the risk of Iranian-style sanctions on Russian energy even as the U.S. and European Union set further limits on companies and officials in the former Soviet state.
The CHART OF THE DAY shows 60-day historical volatility, a measure of price swings, for U.K. next-day natural gas was little changed at 32 percent yesterday, compared with a mean of 69 percent since 2008, according to broker data compiled by Bloomberg. Volatility jumped to 119 percent on Jan. 2, 2009, the day after a Russian cut to Ukrainian gas supply disrupted flows to Europe during a freezing winter.
“The apparent complacency in energy markets likely stems from the fact that the probability assigned to an interruption in oil and gas flows through Ukraine is still low,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London. “The significant producer-consumer inter-dependence between Russia and Europe represents a strong hurdle to overcome before you can escalate sanctions to directly target Russia’s energy sector as is the case for Iran.”
Russia threatened on April 10 to halt gas shipments to Ukraine over unpaid debt. While price disputes between the two nations disrupted flows to Europe in 2006 and 2009, stores in the region are at their highest level for this time of the year since at least 2007, according to Gas Infrastructure Europe, a lobby group in Brussels. About 15 percent of Europe’s gas demand is met by Russian imports flowing through Ukrainian pipelines.
President Barack Obama imposed on April 28 sanctions on seven Russian officials and 17 companies linked to President Vladimir Putin’s inner circle over the crisis in Ukraine. The EU the same day added 15 names to its list of persons sanctioned for “actions undermining Ukraine’s territorial integrity.”
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