Prices rise as temperatures turn cooler, Ukraine transit deal ends
LONDON, Jan 2 (Reuters) - Dutch and British wholesale gas prices rose on Thursday morning as temperatures turned cooler, boosting gas demand for heating, and after a decades-long deal for Russia to supply gas to Europe via Ukraine expired on Tuesday.
The benchmark front-month contract at the Dutch TTF hub was up 1.04 euros at 49.93 euros per megawatt hour (MWh), or $15.17/mmbtu, at 0805 GMT, having earlier touched 50.85 euros/MWh, its highest since October 2023, according to LSEG data.
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The Dutch March contract was up 0.80 euro at 49.63 euros/MWh.
In Britain, the day-ahead contract was up 2 pence at 124.25 p per therm.
“The halt of Russian gas via Ukraine would not pose an immediate supply security risk to the EU, but will naturally tighten the market and increase the EU's LNG import requirements to substitute for the loss of around 15 bcm (billion cubic metres) of piped gas,” Greg Molnar, gas analyst at the International Energy Agency, said in a post on LinkedIn.
Supplies of Russian gas to Europe via Ukraine had kept flowing despite nearly three years of war, but Russian gas firm Gazprom said it had stopped them in the early hours of Tuesday after Ukraine refused to renew a transit agreement.
"The market had apparently still not fully priced this in as hopes for some form of continuation had remained," LSEG analyst Ulrich Weber said in a daily market note.
Weber said prices had also rallied on expectations of cooler temperatures across Europe.
“Average temperatures in NWE (Northwest Europe) are on a falling trajectory with Saturday expected to be the coldest day at an average of 0 degrees Celsius,” he said.
Northwest Europe day-ahead local distribution zone demand for gas, which is primarily for heating, was forecast up 273 gigawatt hours/day (GWh/d) to 4,692 GWh/d, LSEG data showed.
In the European carbon market, the benchmark contract was up 0.65 euro at 73.65 euros a metric ton.
(Reporting by Susanna TwidaleEditing by Mark Potter)