Spot prices in European gas hubs increased rapidly today on fears of a possible disruption of Russian gas supplies to the continent via Ukraine, and a cold weather outlook that could drive demand even higher.

Gas deliveries in front-month April TTF contracts in the Netherlands increased by almost 30% to a record high price of about $2800 per thousand cubic metres.

Significant rises were seen in contracts for deliveries between May and September this year, while the price for contracts covering supplies in October and onwards to the end of this year increased by 10%.

Meanwhile, contracts for gas deliveries in January and February 2023 fell by 3% and 8% to about $1800 and $1600 per thousand cubic metres, respectively, according to the London based ICE Exchange.

The volatility was sparked initially by media reports of erratic deliveries of Russian gas to Germany via the Yamal Pipeline, which runs across Belarus and Poland, with data from German pipeline operator Gascade revealing the pipeline reversed flows to carry volumes from Germany to Poland several times during this week.

Since the start of Russia’s invasion of Ukraine on 24 February, Russian gas giant Gazprom has sent more gas via this route as customers in Poland and Germany sought to replenish near-emty underground storage facilities, while consumption remained subdued because of warm weather.

In addition, Sergei Makogon, executive chairman of Ukraine’s transmission authority Operator GTS Ukrainy, revealed that Ukrainian authorities decided to temporarily restrict the withdrawal of natural gas from storage facilities in the west of the country by privately held traders.

Two years ago, Ukraine unlocked its vast underground storage to European companies in an effort to increase its utilisation rate, allowing them to accumulate and store gas in the country without paying custom taxes.

However, by the end of 25 February — the day after Russia started it’s invasion of Ukraine — private traders stopped placing gas into storage in the country and, between then and 3 March, they also withdrew an estimated 9 million cubic metres of gas, according to Operator GTS’s data disclosure platform.

While Russian gas deliveries to Europe via Ukraine doubled to the daily contractual level of about 110 million cubic metres last week and this week, a further advance of Russian troops in the south of Ukraine spurred fears of a possible major damage to energy infrastructure.

Overnight, a fire started at Ukraine’s largest nuclear power station, in the town of Enerhodar, close to the city of Zaporizhya, following shelling by Russian forces, reminding traders of the risks in continuing to transport Russian gas via Ukraine’s pipeline network.

Another factor behind today’s gas price rally was a 14-day weather forecast, predicting that average nighttime temperatures will remain well below zero degrees Celsius throughout East and Central Europe, as well as Denmark and Belgium.