Page 5 - FSUOGM Week 50 2021

FSUOGM COMMENTARY FSUOGM

European prices continue climb,

shortages loom

Escalating tensions between Russia and Ukraine are behind the latest price spike

EUROPE EUROPE could face rolling blackouts and heat- Norway was also responsible in part for the latest
ing outages this year if the worst predictions are price surge. Troll, the country’s largest gas field,
WHAT: to be believed, amid worryingly low levels of suffered an unplanned outage on December 8.
European gas prices storage, supply constraints and escalating ten- However, the main driving force behind the
continue to climb. sions at the border of Russia and Ukraine. latest price spike was the looming risk of military
The January gas delivery contract at the action in Ukraine, as well as the retaliatory meas-
WHY: Dutch TTF hub was up nearly 7% in early trading ures that would likely follow from Washington.
Tensions between Russia on December 13 at €113 ($127) per MWh. This Ukrainian authorities claim a force of some
and Ukraine have added latest growth comes after the contract surged by 120,000 Russian troops has amassed at the two
to storage concerns. 5% on December 10, reaching €105 per MWh. countries’ shared border, ahead of a planned
The contract began last week on December 6 offensive which Kyiv has said it expects to hap-
WHAT NEXT: at €89.93 per MWh, but surged to €95.88 on pen in late January. US President Joe Biden and
Europe faces a legitimate December 7 and €101.5 on December 8, before his Russian counterpart Vladimir Putin held a
risk of its gas stocks falling slightly to €100.45 on December 9. two-hour video conference on December 7 in
running out before the the hope of defusing the crisis, but neither side
end of winter. Causes appeared willing to give ground.
The latest period of growth is the result of both In the meeting, Biden warned Putin of “eco-
present market forces and speculation. Prices nomic consequences like none he’s ever seen” if
have been on the rise since mid-November – Russia launched an invasion. But he also said he
a month when Russia’s Gazprom was widely did not accept Putin’s “red lines” – namely that
expected to ramp up shipments to Europe but Ukraine’s bid to become a Nato member should
instead exported a multi-year monthly low. Rus- never be accepted.
sian gas flows were up 15% during December 1-8 US Undersecretary of State for Political
versus the November low, Sciences Po energy Affairs Victoria Nuland told the Senate Foreign
expert Thierry Bros estimates, but they were still Relations Committee that the administration
down 17% versus the level in December 2020. was preparing a range of possible responses
Russia has taken a lot of criticism in recent against Russian aggression, including, in the
months for not sending enough gas to Europe, most extreme case, military action.
although the continent’s second-biggest supplier “This time, the intent is to make clear that

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