Russian Attacks on Ukrainian Gas Storage Spark Surge in European Energy Markets
Image Source: Hindustan Times
In a dramatic turn of events, Russia launched attacks on two underground gas storage facilities in Ukraine on Thursday. This aggressive move not only sent shockwaves through Europe’s energy markets but also served as a stark reminder of the vulnerabilities in Ukraine’s energy infrastructure.
Despite the attacks, the facilities are reportedly still operational as experts assess the extent of the damage. Oleksiy Chernyshov, the CEO of Naftogaz Ukrainy, stated that these assaults mark the fourth such incident targeting Ukraine’s gas storage sites. While operations have not been directly impacted thus far, the safety of workers and facilities remains a concern, with Chernyshov advocating for increased air defense measures.
These attacks come at a critical juncture, as Ukraine’s gas storage capacity is the largest in Europe west of Russia. With Europe’s stockpiles potentially reaching full capacity this summer, Ukraine has been actively encouraging traders to utilize its storage facilities.
The repercussions of these attacks were felt across European gas futures, which surged by as much as 9.5%, erasing losses from the previous two days and reaching their highest levels in over three weeks.
Situated in western Ukraine near the EU border, these underground storage sites are as deep as two kilometers and are interconnected with the bloc’s networks, owing to Ukraine’s historical role as a transit route for Russian energy supplies.
Following Russia’s invasion in 2022, Ukraine’s stored gas reserves had plummeted to near zero. However, they have since rebounded, with major companies like Shell Plc and DXT Commodities utilizing its storage facilities. Naftogaz has also engaged in discussions with various international companies, including RWE AG, Equinor ASA, TotalEnergies SE, Engie SA, and SEFE, regarding gas storage partnerships.
Despite Europe’s robust gas inventories exiting the heating season, traders remain vigilant due to the potential for high volatility and supply disruptions. This is especially true as Europe now sources gas from a variety of global suppliers, following Russia’s reduction in pipeline flows over the past two years.
Adding to these concerns, gas supply to the Freeport LNG facility in Texas declined overnight, further exacerbating supply worries. The facility has been undergoing maintenance since late January and has not been operating at full capacity since early this year.
Against this backdrop, Dutch front-month futures, Europe’s gas benchmark, surged by 9.2% to €29.60 a megawatt-hour by 4:55 p.m. in Amsterdam, underscoring the volatility and uncertainty gripping Europe’s energy markets.
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