(Dec 27): European natural gas advanced after Russian President Vladimir Putin cast further doubt on the likelihood of a deal to maintain flows to Europe via Ukraine.

Benchmark futures jumped as much as 5% on Friday, the most in a week. Putin said on Thursday it would be impossible to arrange a new transit contract before year’s end, when the current agreement expires.

Central European nations that still buy Russian gas have floated alternative solutions to keep the fuel flowing across Ukraine, but President Volodymyr Zelenskiy has rejected any arrangement that sends money to Russian coffers while the war continues.

As things stand, there will be no transit of Russian gas from Jan 1, Heorhii Tykhyi, spokesperson for Ukraine’s Ministry of Foreign Affairs, said on Friday. 

Still, talks continue in the remaining days of the year and a last-minute deal cannot be completely ruled out, especially given the history of such arrangements at the last moment during previous gas disputes between the two nations.

If Ukraine receives any proposals from the European Commission on continuing transit, it is ready to consider them and guarantee “energy security for the region”, Tykhyi said. Some consultations in “different formats” are taking place, but “not with Russia, of course”, he added.

Meanwhile, no capacity on the Slovakia-Austria border point was booked for January at auctions on Friday.

Putin on Thursday acknowledged that the various proposals on the table — allowing Hungary, Slovakia, Turkey or Azerbaijan to take control of the gas shipped via Ukraine — are difficult to realise because Gazprom PJSC has long-term contracts that are hard to change.

The flows at risk account for about 5% of European demand. While that’s a small slice of the market, the loss of those volumes would force countries to rely more heavily on piped gas from Norway or liquefied supplies from the US.

Traders in Europe are closely monitoring the region’s gas storage, with levels now below 75%.

Putin also said a lawsuit from Ukraine’s Naftogaz that alleges Gazprom hasn’t fully paid for transit services is another barrier to a deal. That claim must be withdrawn for any transit agreement to be reached, he said.

Dutch front-month futures, Europe’s gas benchmark, rose 3.38% to €47.27 (RM219.72) a megawatt-hour at 12.13pm in Amsterdam. The January contract expires on Monday.

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