By Geoffrey Smith
Investing.com -- European natural gas futures skyrocketed on Wednesday to new all-time highs, as the consequences of new Western sanctions on Russian banks began to bite.
The April contract for Dutch TTF Futures, the benchmark contract for north-west Europe, soared to as high as 193.95 euros ($214.80) a megawatt-hour before retracing a little later to 164.75 euros/MWh by 4:25 AM ET (0925 GMT). That's up 35% on the day and 24% its previous all-time high close, posted in December.
The movement reflects the growing uncertainties - both legal and physical - over the availability of supplies out of Russia, due to its invasion of Ukraine and the sanctions imposed on Russian banks by the European Union and the U.S.
The EU is due to publish later Wednesday the details of its measures excluding 'certain Russian banks' from the SWIFT financial messaging system. While the EU said last week that there would be exemptions from the sanctions that allow payment for Russian energy exports to continue, the details still risk disrupting the flow of some supplies. Germany has already said that it will not commission the new string of the Nord Stream 2 gas pipeline that was completed at the end of last year.
Europe imports around 400 billion cubic meters of gas annually, with nearly half of that coming from Russia. Given that other import channels such as regasification plants in Spain, the U.K., and Belgium are already running at close to capacity, there are few obvious short-term solutions to an impending gas crunch in the continent.
"In some places, LNG capacity is enough to offset the Russian gas; in most places, it is not," said Nikos Tsafos of the Center for Strategic and International Studies in Washington, said earlier this week.
Natural gas is one of a handful of global commodities markets currently spiking due to Russia's invasion of Ukraine. Brent blend crude oil futures rose 5.8% to over $111 a barrel on Wednesday, while U.S. Wheat futures are within touching distance of their all-time high after another 7.6% rise.