European Natural Gas Extends Drop on Steady Russian Flows

(Bloomberg) -- Benchmark European natural gas prices declined for a seventh session, amid signs of steady Russian flows and a warmer weather outlook for parts of the continent. 

Orders for Russian gas shipments via Ukraine edged higher Monday, but remained below capacity, while the Yamal-Europe pipeline continued to flow eastward to Poland from Germany. Supplies through Russia’s main pipeline to Europe, Nord Stream, remain high and stable.

While the European Union last week agreed to ban coal imports from Russia -- the first time the bloc’s sanctions have targeted Moscow’s energy revenues -- gas continues to be spared from penalties aimed at the country for its invasion of Ukraine.

Dutch front-month gas futures settled 3.6% lower at 100.14 euros per megawatt-hour. The U.K. equivalent contract dropped 6.8% to 213.01 pence a therm.

Above-average temperatures in the U.K. are expected early next week, before turning well below normal from April 21, according to The Weather Co. The milder outlook, coupled with warmer weather forecasts for some parts of continental Europe and strong imports of liquefied natural gas, has helped push gas prices lower recently. 

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The EU has a contingency plan to help Ukraine and Moldova with reverse gas flows if the war causes disruptions to supplies from Russia, said European Energy Commissioner Kadri Simson. She added that the bloc can’t currently treat Russia as a trustworthy partner and that disruptions may happen.

Austrian Chancellor Karl Nehammer became the first EU leader to visit President Vladimir Putin in Moscow since the start of the war, and asked him to end it. The Kremlin said before the meeting the two leaders might also discuss gas issues.

“The first face-to-face meeting between President Putin and a European leader offers greater prospects for an end” to the conflict, consultant Inspired Energy Plc said in a note. However, earlier talks between Putin and other European leaders, including French President Emmanuel Macron, have failed to yield any meaningful concessions.

Russian gas supplies are still in focus given the war, and the new payment mechanism proposed by President Vladimir Putin for April sales.

Hungary will continue to wire euros to Gazprombank for Russian gas, which will then covert the sum to rubles, Foreign Minister Peter Szijjarto said Monday. 

Putin last month demanded that “unfriendly countries” pay for gas in the Russian currency, a move rejected by EU leaders. The Kremlin has since published a decree outlining a mechanism that allows foreign buyers to convert dollars and euros into rubles through the state-controlled Gazprombank.

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