U.K. natural gas climbed to a two-week high after the U.S. and the European Union imposed the most aggressive sanctions to date on Russia and after reports that a passenger jet was shot down in eastern Ukraine.
Gas in the U.K., Europe’s biggest market, advanced as much as 7.2 percent, the biggest gain in a month, on the ICE Futures Europe exchange in London. A Malaysia Airlines Boeing 777 jet carrying 295 people was shot down by pro-Russian rebels near Donetsk, Ukraine’s Interior Ministry adviser Anton Geraschenko said on his Facebook page. The EU and U.S. late yesterday extended sanctions imposed on Russia, with targeted companies including OAO Rosneft, the country’s largest oil driller, gas producer OAO Novatek and OAO Gazprombank, the nation’s third-largest lender.
The U.S. and the EU acted after travel bans and asset freezes aimed at President Vladimir Putin’s inner circle failed to force Russia to meet an ultimatum to end support for separatists in Ukraine’s east. Russia meets about 30 percent of Europe’s gas needs, half of which goes through pipelines crossing Ukraine. Disputes between the two former Soviet nations disrupted supplies to the EU in 2006 and 2009 amid freezing weather.
“There is potentially some additional risk premium on the back of the recent sanctions being built into prices over fears of any impact this may have on Russian supplies into western Europe, which are currently reported as normal,” Wingas U.K. Ltd., a wholesaler, said in a report e-mailed today.
Front-month U.K. gas climbed as high as 39.72 pence a therm ($6.79 per million British thermal units) on ICE. The contract was at 39.63 pence at 4:58 p.m. in London. Dutch gas for August on the Title Transfer Facility hub rose as much as 5.9 percent to 17.10 euros ($23.13) a megawatt-hour, the highest since July 1, broker data compiled by Bloomberg showed.
Putin denounced the sanctions as a reflection of an “aggressive” U.S. foreign policy. At a news conference in Brazil, he warned they are liable to “boomerang” and hurt U.S. business interests. Putin has denied fomenting the rebellion even as Russian troops have begun massing anew on Ukraine’s border. OAO Gazprom, Russia’s state-run pipeline gas monopoly, wasn’t included in the sanctions. A meeting with the EU’s Energy Commission was delayed to next week, Russia’s Energy Ministry said today.
“These latest U.S. sanctions will potentially be the first since the crisis started to have a direct impact on the energy sector,” Trevor Sikorski, head of gas, coal and carbon at consultants Energy Aspects Ltd. in London, said by e-mail today. As neither Rosneft or Novatek can “directly export gas, this will have little impact on gas supply into Europe.”
Gas supplies to the European Union have been flowing normally since Russia cut supplies to Ukraine on June 16. Slovak grid operator Eustream said it didn’t record pressure reduction at the compressor station at the border with Ukraine, according to a statement on its website today. Ukraine pumped gas into storage for a fourth week since the Russian cut off in the 7-day period ended July 11, according to data from Gas Infrastructure Europe, a lobby group in Brussels.
Within-day gas rose as much as 5.1 percent to 39.25 pence a therm on the National Balancing Point hub, while the day-ahead contract gained as much as 5.4 percent to 39 pence a therm, broker data showed. The nation’s pipelines were forecast to contain 2 percent less gas at 6 a.m. tomorrow from the same time today while demand was forecast at 175.9 million cubic meters, 2.3 percent below the seasonal norm, according to National Grid Plc, the network operator.