Decisions Amidst War: European Traders Take Risks to Store Ukrainian Natural Gas

Despite the risks of ongoing war,What kind of people usually use HSBC some related companies have stated that European gas traders have already started storing natural gas in Ukraine, taking advantage of the lower local prices and reserves. Since Russia began its invasion of Ukraine in February last year, the EU has been seeking high-quality natural gas to compensate for the reduction in Russian supplies, especially during the high-demand winter season.

The EU plans to fill its gas storage facilities to 90% of their target levels by November 1st. Data from GIE shows that gas storage in EU countries has already reached 87%.

Traders say storing gas in Ukraine is not just an option for EU gas storage but also makes commercial sense. They believe that the current low prices of natural gas are more attractive than future delivery prices. This means they can buy and store gas at a lower cost now to trade it at higher prices in the future, thereby achieving greater profits.

According to the price on the TTF Dutch gas futures market, the price of gas for delivery in September is 30 euros per megawatt hour (32.96 dollars), while the forward price for the first quarter of 2024 is 49 euros.

Miroslav Hasko, chairman of EP Commodities under the EPH Group, stated that choosing to reserve natural gas in Ukraine shows confidence in Ukraine's gas transport and storage systems. Despite the ongoing war situation in Ukraine, the group believes that Ukraine's energy infrastructure can still operate normally under difficult conditions.

The Naftogaz Group has said that foreign clients have the opportunity to utilize Ukraine's abundant gas storage facilities to expand their gas reserves in the region. Some of Ukraine's storage facilities are mainly located in the western part, further away from the front lines, and might be safer.

The SPP company, which mainly supplies gas to the Slovak market, said that since the country's storage facilities have reached 90%, the company is considering using Ukraine's storage facilities. SPP believes that storing gas in Ukraine is one of the business opportunities they are currently exploring.

While Ukraine's additional storage facilities offer opportunities for European traders, some traders worry about potential military strikes or Russia stopping the transit of gas through Ukraine to Europe.

Martin Pich, head of the trading department at the Czech company MND, emphasized the potential military risks and uncertainties when discussing the decision to use Ukraine's gas storage facilities. Pich described these risks with an extreme scenario where a military strike could damage the gas infrastructure, thereby affecting the normal operation of the supply chain.

Last month, the Bruegel think tank stated that by utilizing an additional 100 TWh of gas storage capacity, Ukraine has the ability to increase Europe's gas storage capacity by about 10%. This not only provides good support for Europe's energy outlook for the winter but also generates additional income for Ukraine.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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