[Asia Economy Reporter Park Byung-hee] As tensions between Russia and the West over Ukraine escalate, European natural gas prices have surged to record highs once again.
The Dutch TTF exchange, the benchmark for European natural gas prices, saw the January 2023 delivery futures price rise 12.6% from the previous day to 130.7 euros per MWh on the 14th (local time). This surpassed the previous record high of 116.5 euros set on October 5.
European natural gas prices had declined after Russian President Vladimir Putin instructed the state-owned gas company Gazprom to increase natural gas supplies to Europe in October. By the end of October, prices had fallen to around 60 euros.
However, Europe's gas reserves have not increased. Due to the cold wave and rising heating demand, gas storage across Europe is currently only 62.8% full, which is more than 10 percentage points lower than usual for this time of year.
Norbert Rucker, investment strategist at Swiss investment bank Julius Baer, explained, "Natural gas demand has temporarily increased recently due to the cold weather," adding, "The bigger reason is the rising tensions between Russia and Ukraine, which have heightened concerns about supply disruptions, leading to a risk premium being added to natural gas prices."
Russia is estimated to have deployed about 100,000 troops near the Ukrainian border. The United States warned that Russia could invade Ukraine as early as early next year and stated that the West would impose strong economic sanctions on Russia if an invasion occurs.
The U.S. has demanded that Germany halt the operation of the Nord Stream 2 gas pipeline if Russia invades Ukraine. Nord Stream 2, which connects Russia and Germany, was completed in September. However, Germany has not yet approved its operation. On the 13th, German Foreign Minister Annalena Baerbock stated that if tensions escalate in Ukraine, Nord Stream 2 would not be operated.
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