The Coal Trader

Coal News for Mining & Investing Professionals

European Gas rises on EU-Russia ruling and surging CO2

European gas prices rose on Thursday as newly approved EU legislation raised the prospect of further reductions in Russian flows, while fresh attacks on Ukraine’s energy system also buoyed the market as did a jump in carbon prices.

The front-month Dutch TTF gas contract was seen last EUR 2.46 higher at EUR 29.56/MWh on Ice Endex. It earlier reached a 2.5-week high of EUR 29.70/MWh.

“Besides renewed Russian attacks on Ukrainian energy infrastructure, including gas storage, the European Parliament’s decision on Russian gas should be the main driver behind the bullish sentiment in the market today,” said Ulrich Weber, senior European gas and LNG analyst at LSEG.

Earlier, the European Parliament formally approved draft rules allowing EU countries to temporarily block Russian gas imports in a vote on wider gas and hydrogen market legislation.

Legal block
“Now, a legal path to block Russian gas exporters from bidding on capacity of European gas infrastructure is available,” said Weber.

“And not only LNG could be impacted but apparently also piped deliveries. Hence, this decision lowers chances of gas coming through Ukraine post transit agreement,” he added.

This was in reference to the conclusion at the end of the year of a five-year agreement on the transit of Russian gas via Ukraine.

Russia carried out widespread attacks on Ukrainian energy infrastructure early today, in which it “completely destroyed” the 1.8 GW Trypillia combined heat and power plant. There were reports also by local media that underground storage facilities – widely used by foreign firms – were also targeted.

An analyst with a gas-trading firm said lower European gas supply in recent weeks had become a “primary driver” for prices, with the market “much more sensitive” to supply-side uncertainties.

A European carbon trader, meanwhile, said EUA prices – which today surged to three-month highs – were contributing to the gas price gains.

“It has become impossible to trade EU gas without taking into account the EUA dynamics these days,” he said, adding “there is a big party on the emissions side [today]”.

The benchmark Dec 24 EUA contract was last seen EUR 5.26 higher at EUR 68.13/t on Ice Endex. It earlier reached its highest since 12 January of EUR 68.25/t.

EUA squeeze
“EUAs are in the middle of a squeeze,” he said, pointing to speculative investors last week having increased their net short positions in the carbon market, the first expansion since mid-February.

Investment funds increased their net short position to just over 25m tonnes last week, up from 22.7m tonnes in the prior week, according to the Ice Exchange’s latest report on the commitment of traders.

At the same time, coal prices rose in line with gas and carbon but also amid some tightening of prompt supply, analysts said. The front-month API 2 contract traded last up USD 2.80 at USD 118/t, on Ice Futures, its highest since Wednesday last week.

By Laurence Walker