Analysts: Gas prices could react further to Russian counteroffensive in Kursk region

Europe’s natural gas market is experiencing greater price volatility this week, once again driven by concerns about Russian gas supplies. Reports of a planned Russian counteroffensive in the Kursk region appear to have supported gas price rises at the start of the week. Russian territory under Ukrainian control is key to gas transit through Ukraine, as it is home to the last handover point through which Russian gas still flows to Ukraine and onwards to Europe.

According to Christoph Halser, an analyst at Rystad, fighting is also expected to take place around the town of Sudzha, near which a compressor station and a handover point are located. Russian gas is still flowing through this point. Natural gas stopped flowing through the other crossing points on the Russia-Ukraine border in recent years. The only other active route for Russian gas supplies to Europe via pipeline is TurkStream, which runs through Turkey.

“The counteroffensive in the Kursk region, involving North Korean troops, threatens Russian gas supplies to Europe,” Christoph Halser said, according to Montel.

The expected attack “is certainly a price-supporting factor today, as the market is pricing in the risk of possible damage to infrastructure, given that the Sudzha metering station is located in the area,” Marina Tsygankova of LSEG told Montel this week.

Concerns about Russian gas supplies to Europe come at a time when temperatures are falling below average, pushing up demand for heating. In addition, large parts of Europe have been experiencing very low wind power generation since the start of the month. This usually leads to greater gas consumption at gas-fired power plants to generate electricity.

Will gas flow through Ukraine next year?

The future of Russian gas supplies after the end of this year has kept the European market on alert. In recent months, various reports have emerged about negotiations on gas supplies from Azerbaijan, which could flow through Ukraine.

Although all the initial reports, which had not been officially confirmed, were quickly denied, some negotiations may be taking place. This is also suggested by yesterday’s announcement from Slovak company SPP, which has signed a short-term pilot contract with Azerbaijani company SOCAR.