Natural gas prices in Europe declined as top supplier Russia tried to reassure buyers that they can keep paying for gas without breaching sanctions.
Benchmark futures dropped as much as 7.6%, and power prices fell. In a letter seen by Bloomberg, Gazprom PJSC told European clients that a new order published by the Kremlin on May 4 "clarifies the procedure” set out in the initial decree on ruble payments for gas. It’s not yet clear if the new document will be enough to assuage the concerns of the European Union.
Poland and Bulgaria have already been cut off after they failed to meet Moscow’s new rubles-for-gas system. Other countries’ payment deadlines fall later this month.
Ample supplies of liquefied natural gas and warm weather are also providing bearish sentiments. Temperatures are seen at above to well-above normal levels across mainland Europe and the U.K. for the next two weeks, according to The Weather Co.
"Overall LNG arrivals and hot spring weather continue to reduce worries about supply from Russia,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
More LNG may be available for Europe as cooler weather in many cities in Asia over the next two weeks reduce demand, BloombergNEF analyst Daniela Li said in a note.
Benchmark Dutch front-month gas traded 5.4% lower at 96.25 euros per megawatt-hour as of 10:25 a.m. in Amsterdam. The U.K. equivalent contract fell 8.4%. German year-ahead power prices, the European benchmark, fell as much as 2.9%.
Meanwhile, traders and policymakers are closely watching Russia’s next moves with the war in Ukraine stretching beyond 10 weeks. In his annual Victory Day address Monday, President Vladimir Putin repeated claims that Moscow’s invasion was a response to potential attacks on areas controlled by pro-Russian separatists and Crimea.
