Dutch natural gas fell the most in two months after Ukraine allowed Russian aid across its border and talks between the former Soviet nations brought some progress. U.K. fuel slid the most in almost three weeks.
Front-month gas in the Netherlands, the European Union’s largest producer, slid as as much as 4.5 percent, the biggest decline since June 17, according to broker data compiled by Bloomberg. Gas in the U.K., Europe’s biggest market, slid as much as 4.8 percent on the ICE Futures Europe exchange, the most since July 29. A Russian aid mission will proceed through the Ukrainian border under the supervision of the International Committee of the Red Cross, which will inspect the cargo and distribute it.
Ukrainian Foreign Minister Pavlo Klimkin said talks with Russia started this weekend in Berlin had brought “moderate progress,” while his Russian counterpart Sergei Lavrov said progress was made in securing the border between Russia and Ukraine. The nations discussed a “badly needed” cease-fire, said German Foreign Minister Frank-Walter Steinmeier. Russia supplies about 30 percent of Europe’s gas needs, half of which travels through Soviet-era pipelines crossing Ukraine.
“There appears to have been a limited improvement over the weekend,” London-based consultant Energy Aspects Ltd. said in a report e-mailed today. “The Russian and Ukrainian foreign ministers met in Berlin on Sunday for talks aimed at ending the fighting. While a cease-fire still appears elusive, the two sides talking represents a measure of progress.”
Dutch gas for September delivery fell to the daily low of 18.15 euros ($24.24) a megawatt-hour on the Title Transfer Facility hub at 4:55 p.m. London time, broker data showed. Prices rose as much as 4.2 percent on Aug. 15 after Ukraine said it had attacked and partially destroyed a Russian armed convoyed that crossed the border. Front-month U.K. gas dropped to 42.69 pence a therm ($7.14 a million British thermal units) on ICE before trading at 42.76 pence a therm.
European leaders are pushing for an end to the conflict that’s killed more than 2,000 people. The European Commission, the European Union’s regulatory arm, has also been trying to broker a deal between Russia’s OAO Gazprom (OGZD) and NAK Naftogaz Ukrainy that would allow supplies to flow normally. The Russian pipeline-gas export monopoly halted supplies to Ukraine June 16 over a price and debt disagreement. Similar disputes in 2006 and 2009 disrupted gas flows to Europe amid freezing weather.
“Weather and autumn has begun to add seasonal support, but the sharp move higher on Friday clearly shows the nervousness that remains,” Ole Hansen, head of commodity strategy at Saxo Bank A/S in Copenhagen, said by e-mail today. “The ebb and flow of news related to Ukraine continue to set most of the current agenda in the European gas market.”
Ukraine passed a bill last week that enables the country to impose sanctions on Russia that may include banning Gazprom from transiting fuel through Ukraine and forcing European companies to buy gas at the Ukrainian border. If the sanctions are imposed, further gains in gas prices should be expected, according to Energy Aspects.
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