EUROPEAN GAS PRICES UPDOWN

BLOOMBERG - Jan 15, 2025 - European natural gas prices fluctuated amid reports that the European Union is considering phasing out Russian LNG as part of a fresh package of sanctions.
Benchmark futures swung between small gains and losses on Wednesday after Bloomberg reported on the discussions. Exiting liquefied natural gas could be done either as a sanction or as part of a road map that the bloc’s executive arm is set to present next month, people familiar with the matter said.
While Europe’s pipeline gas flows from Russia have dwindled in recent years, it imported record LNG volumes from the country in 2024. The fuel has been a personal focus of Russian President Vladimir Putin, who has vowed to continue the nation’s exports despite mounting restrictions.
“A potential ban on Russian LNG will likely only add to supply uncertainty for the European market, potentially offering some support to prices,” Warren Patterson, head of commodities strategy at ING Groep NV, and Ewa Manthey, the bank’s commodities strategist, said in a note. “In 2024, around 18% of EU LNG imports came from Russia.”
The EU still needs to decide whether it should rely on legally-binding sanctions, regulations as part of a road map, or a mix of those two, according to officials and diplomats with knowledge of the talks.
While 10 EU nations this week pushed for a ban on Russian LNG imports, the calls did not come from the biggest nations receiving the fuel, which include Spain, France and Belgium. The US last week sanctioned two smaller Russian LNG projects, Portovaya and Vysotsk.
While Europe has managed to diversify its energy supplies since the 2022 crisis — making a phaseout of Russia’s fuel potentially less challenging — this winter has served as a reminder that the region remains vulnerable. Cold weather has led to faster-than-usual withdrawals from gas storage sites and is expected to persist for most of the second half of January.
Gas prices could average €47 a megawatt-hour in 2025, exceeding the median consensus by nearly 25%, Patricio Alvarez and Joao Martins, analysts at Bloomberg Intelligence, said in a note.
“The risk of a supply crisis seems limited, but meeting the bloc’s 90% fill target before next winter may intensify competition for liquefied natural gas with Asia,” they said.
Dutch front-month futures, Europe’s gas benchmark, traded slightly higher at €47.20 a megawatt-hour by 9:22 a.m. in Amsterdam.
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