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  • August 8th, 2014

UK Winter gas gains 4% as Ukraine mulls cutting Russian EU supplies

Gas for Winter delivery in the UK saw intraday gains of more than 4% Friday as the market reacted to news that Ukraine may block flows of Russian gas through its territory.

The Winter 14 contract traded as low as 59.50 pence/therm on ICE during the morning but following the news jumped to 62.00 p/th.

The rise followed news that Ukrainian Prime Minster Arseniy Yansenyuk said Kiev may stop transit of Russian gas deliveries to Europe via Ukraine as part of sanctions against Russia.

At the end of July the UK’s National Grid said an interruption to Russian gas flows through Ukraine could cut 207 million cubic meters/day of supply to the EU during the winter.

The potential for Russia to re-route gas via the Yamal and Nord Stream pipelines, however, could reduce the impact to EU-bound deliveries to 117 million cu m/d, National Grid said.

To put the figures into context, total seasonal normal gas demand in the UK at the moment is about 170 million cu m/day. It’s higher during the winter as gas-fired heating usage increases.

While the UK doesn’t receive significant volumes of gas from Russia, both direct and indirect connections to European markets make it likely that UK gas supplies would change, National Grid said.

The intraday gains have seen the Winter contract trade 3.18 p/th higher than its average price for the first week of August.

One UK gas trader said the market could be waiting on firmer news and more significant gains would be seen if Ukraine does decide to block transit gas.

“It is very fresh — we’ll wait to see if it is formally announced,” the trader said.

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