Putin doubles down on gas payments in rubles
The Russian President has reinjected volatility on the TTF by doubling down on last week’s order to demand payment for gas from ‘unfriendly’ states in rubles, directing the Russian Central Bank and Gazprom to present proposals to this effect by Mar 31.
Adding fuel to the fire, Russian law maker Ivan Abramov has reportedly said supplies will stop if the ruble payment mechanism is not honored.
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From a commercial perspective, delivering below committed volumes may mean a contract infraction, usually accompanied by supplier penalties and in prolonged cases could lead to a breach of contract and arbitrations.
However, because the European pipeline grid is highly connected Russia cannot limit volumes to a specific country.
This means that both the markets which might accept the proposed changes and those that do not are likely to be affected by any attempts to restrict flows to certain markets.
The market is watching for the results of the next round of Russia-Ukraine negotiations, though not many are holding their breath for a breakthrough.
Gazprom has reportedly sought payment from Indian buyer GAIL in Euros, on the currently dollar denominated 2.5 MTPA SPA.
GAIL appears open to the request, which if implemented (which would take several months) may set a precedent for other such SPA currency conversions.
The TTF, which hit a low of 93 EUR/MWH (~$31/MMBtu) earlier in the day is trading up over 12% since then.
As the Russian statements have not been yet reflected in prices, market fundamentals reassumed the helm today indicating a bullish direction due to the expectation of below normal temperatures in Europe for the next week, coupled with lower wind output in Germany and an unplanned outage at France's 900 MW Dampierre 1 nuclear unit.
Main gas flows from Russia and Norway kept stable with a mild ~1% decrease in total volumes.
Germany was the first country to officialize the commitment to reach 90% of storage levels until November 1 by approving a new law.
In Asia, the only downside indicator is China’s massive lockdown - including the staggered lockdown major city of Shanghai - which may dampen power and industrial demand in the near term.
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