Veteran gas trader Bill Perkins warned on Thursday of potential “catastrophic pricing” this winter if Russia’s move to cut gas supplies to Poland and Bulgaria ends in a complete energy blockade.
“Currently, the market is bleak,” Perkins, CEO and chief trader at Skylar Capital Management, told CNBC.
“We’re in hot button panic mode,” Perkins added. “If Russia stops gas and oil, Europe will fight this winter to keep it warm and just keep its economies going,” he said.
Russia’s Gazprom on Tuesday briefed Poland and Bulgarian state-owned gas companies PGNiG and Bulgargaz that it would cut off gas supplies after both sides refused President Vladimir Putin’s demands to pay for supplies in Russian rubles.
The escalation led to an increase in the Dutch wholesale gas contract for the day ahead, a benchmark for Europe, by more than 20% on Wednesday. Dutch natural gas futures TTF have risen by almost 60% since the beginning of the year.
“Expect higher prices and high volatility over the next few years,” Perkins warned, describing his prospects for future markets as “slightly bearish in the forefront” but “constructive and long-term.”
“Given where the current prices and LNG flows are [liquefied natural gas] in northwestern Europe, this is actually a bearish situation that prevents the complete elimination of Russian gas, “he said.” Given that they fired the first rocket … everyone else is aware, so these bear bets are reduced. ” he added.
“In the winter, all bets are ruled out,” Perkins said. “Without Russian gas, which accounts for about 40% of their gas supplies or gas demand, it’s really hard to see the market balance without running out of gas.”
Employees pass under pipes leading to oil storage tanks at the central oil and gas refinery at Salym Petroleum Development’s oil fields near the Bazhenov shale layer in Salim, Russia.
Andrey Rudakov Bloomberg | Getty Images
Last year, the European Union imported 155 billion cubic meters of natural gas from Russia, representing about 45% of EU gas imports and nearly 40% of total gas consumption, according to a recent report by the International Energy Agency.
European politicians have rejected Putin’s request, saying it violates existing treaties that have already been negotiated in dollars or euros. Europe still considers a total ban on Russian imports, despite its widespread dependence on Russia for energy. European energy ministers are expected to discuss the next steps at a meeting in France on Monday next week, according to a recent Reuters report.
The United States and the United Kingdom have banned Russian energy imports, but European countries heavily dependent on Russian supplies, such as Germany, are reluctant to follow suit. Germany has said it could give up Russian oil by the end of the year.
“This is a clear escalation of risks in the gas markets,” MUFG analysts said in a research note on Thursday, describing Russia’s ban as a “major turning point for European gas markets.”
“We believe it is in the interest of both the EU and Russia to develop a solution that brings gas payments in line with EU law … given the unprecedented burden that blocking gas flows will have throughout continent, “MUFG analysts said, warning that an” immediate disruption “of Russian flows to northwestern Europe could raise TTF prices north by 200 euros per megawatt-hour” for a long time. “
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