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Russia's Novak says European gas prices could exceed $4,000 per thousand cubic meters


Deputy PM blames low gas stocks, Nord Stream 2 cancellation for high prices

Says sanctions on Russia could have 'unpredictable' impact on prices

Energy markets could 'collapse' without Russian hydrocarbons

  • Author
  • Rosemary Griffin
  • Editor
  • Alisdair Bowles
  • Commodity
  • Natural Gas Oil
  • Topic
  • Europe Energy Price Crisis War in Ukraine

Russian deputy prime minister Alexander Novak said March 23 that European gas prices could exceed $4,000/1,000 cubic meters given the current situation in energy markets.

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Novak pointed to insufficient filling of underground gas storage and cancellation of the Nord Stream 2 pipeline as reasons for high prices.

"The gas price at some points... reached up to $4,000 per thousand cubic meters. This is in fact not the limit," Novak said, addressing the Russian State Duma.

"The ban on commissioning Nord Stream 2 is absolutely absurd, and a misunderstanding of energy balances," Novak said.

A price of $4,000/1,000 cu m at current exchange rates is the equivalent of around Eur340/MWh, according to S&P Global Commodity Insights calculations.

Related Infographic: How much Russian oil does Europe import?

The TTF month-ahead gas price hit a new record high on March 8 of Eur212.15/MWh, according to Platts assessments by S&P Global, an increase of 1,190% year on year. It had also reached a high of Eur345/MWh intraday on March 7.

The TTF day-ahead price rose 3.3% during the March 22 trading session to be assessed at Eur94.625/MWh.

Novak added that Western sanctions against Russia could have an "unpredictable" impact on energy prices and that energy markets could see a "collapse" without Russian hydrocarbons.

Western countries and oil majors have moved to restrict uptake of Russian hydrocarbons in response to Russia's invasion of Ukraine Feb. 24.

Novak added that the Russian energy sector continues to operate stably despite sanctions.

A further risk to supplies from the region is damage to the Caspian Pipeline Consortium's network reported by the operator March 21.

The pipeline supplies primarily Kazakh crude, but also some Russian volumes.

Novak said that the incident could have a serious impact on global oil markets.

Risks to oil products supplies in Europe have also risen on the conflict in Ukraine.

"European diesel inventories are at their lowest level since 2008, 8% below the average for the last five years. Diesel fuel shortages could be a strong destabilizing factor as demand increases due to the resumption of freight and passenger traffic after the pandemic," Novak said.

He added that due to the sanctions, Western countries may be forced to introduce limits on fuel consumption.