Veteran trader warns Russia’s halt to European gas could lead to ‘disastrous’ winter prices 2022-04-28 06:04:28


Veteran natural gas trader Bill Perkins warned Thursday of potential “catastrophic prices” this winter if Russia’s move to cut gas supplies to Poland and Bulgaria ends with a full energy blockade.

“It’s a questionable market right now,” Perkins, CEO and lead trader at Skylar Capital Management, told CNBC.

“We are in a panic over the hot box button,” Perkins added. “If Russia cuts off gas and oil, Europe will scramble this winter to maintain heating, and just to preserve their economies,” he said.

Russia’s Gazprom on Tuesday told the state gas companies of Poland and Bulgaria, PGNiG and Bulgargaz, that it would halt gas supplies after the two countries rejected President Vladimir Putin’s demands to pay for supplies in Russian rubles.

The escalation sent the Dutch wholesale gas contract for the next day, a benchmark for Europe, up more than 20% on Wednesday. Dutch company TTF Natural Gas futures are up nearly 60% since the start of the year.

“Expect higher prices and a lot of volatility in the next few years,” warned Perkins, describing his outlook for the market as “a little bearish on the front” but “constructive and bullish over the long term.”

“Looking at where prices are now, LNG flows [liquefied natural gas] For Northwest Europe, it is actually a downward situation that prevents the complete removal of Russian gas. “Given that they fired the first missile…everyone is aware of that, so those downside bets are once again pared down,” he added.

“In winter, all bets are off,” Perkins said. “Without Russian gas, which is about 40% of their gas supply or their demand for gas, it’s really hard to see how the market balances without running out of gas.”

Employees pass under pipes leading to oil storage tanks at the oil and gas central processing plant of the Salym Petroleum Development oilfield near the Bazhenov shale formation in Salym, Russia.

Andrei Rudakov | Bloomberg | Getty Images

Last year, the European Union imported 155 billion cubic meters of natural gas from Russia, which is about 45% of the EU’s gas imports and nearly 40% of its total gas consumption, according to recent report From the International Energy Agency.

European policy makers Putin’s request refused, saying it violates existing contracts already agreed to in dollars or euros. Europe is still fully weighed Ban on Russian importsDespite its extensive dependence on Russia in the field of energy. European energy ministers are expected to discuss next steps at a meeting in France As soon as Monday next weekAccording to a recent report by Reuters.

The United States and the United Kingdom moved to Russian Energy Ban imports, but European countries that depended heavily on Russian supplies, such as Germany, were reluctant to follow them. Germany has indicated that it may distance itself from Russian oil year end.

“This is a clear escalation of risks in gas markets,” MUFG analysts said in a research note Thursday, calling the Russian ban “a major turning point for European gas markets.”

MUFG analysts said: “We believe it is in the interests of both the EU and Russia to reach a solution that brings gas payments in compliance with EU legal requirements … given the unprecedented burden that the interruption of gas flows across the continent could cause,” warning that “the immediate outage For Russian flows into northwest Europe it could raise fund prices north by €200 per megawatt-hour “for the long haul.”