December futures spiked to levels last seen in December 2023 on concerns that Russia could halt supplies

Natural gas prices in Western Europe spiked on Thursday following warnings from Austrian state energy giant OMV that Russia could halt supplies.

The cost of gas futures for December delivery at the TTF hub in the Netherlands jumped by as much as 5% to roughly €475 ($502) per thousand cubic meters, or €46 per megawatt-hour, during morning trading, before retreating slightly later in the day. The last time gas futures were at this level was in December 2023.

Gas prices began to surge after OMV, one of the continent’s largest gas traders, warned late on Wednesday about a possible cessation of gas supplies from Russia due to its legal battle with Russian state energy major Gazprom. OMV had previously complained of “irregular” supplies from Gazprom to Germany, before deliveries ended completely in September 2022, and filed a lawsuit against the company’s subsidiary, Gazprom Export.

OMV announced on Wednesday that it has won the lawsuit and had been awarded €230 million in compensation, which it planned to “offset” by withholding its monthly payments for gas under its contract with Gazprom.

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The company warned, however, that this move might lead to “a deterioration of the contractual relationship” with Gazprom and result in a “potential halt of gas supply.” OMV claimed, however, that it would be able to continue delivering gas to its customers by tapping storages even if supplies from Russia were disrupted.

OMV receives Russian gas under a long-term deal with Gazprom that ends in 2040. While Vienna has voiced its intention to end its decades-long dependency on Russian gas, it has failed to find alternative providers, as imports from other countries have been much more expensive.

Austria’s imports of Russian gas reached pre-Ukraine conflict levels last year, as the country imported almost double the amount of gas its economy needed. Stable Russian supplies allowed Vienna to become a net energy exporter to other European states.

Following OMV’s warning, Austrian Energy Minister Leonore Gewessler said the country’s gas supplies were secure because it had been “preparing for a possible supply disruption for a long time” and its gas storage facilities were full.

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“The current developments surrounding the OMV supply contract for Russian gas are to be taken seriously, but do not pose an immediate threat to our security of supply. Austria can and will manage without Russian gas,” Gewessler wrote on X on Thursday, admitting, however, that “it is clear that a sudden interruption in supply could cause tension on the gas markets.”