EU begs US for relief from gas sanctions on Gazprombank

The European Commision President  Usula Von De Leyen  has urged the United States to explore potential avenues for relaxing sanctions against Russia's Gazprombank. Meanwhile, how much gas do Russia's primary competitors supply as a result of the ongoing market supply fluctuations?
Also we look at despite a decline in demand, gas prices continue to rise. So lets look at the situation with gas in Europe

The European Union is requesting that the United States consider ways to ease sanctions on Russia's Gazprombank, a financial institution responsible for the uninterrupted supply of Russian natural gas to the EU, as reported by the Luxembourg Times.
The publication also states that the EU and the US are currently discussing the type and scope of measures to mitigate the consequences of sanctions against Gazprombank. This follows warnings from some European governments and companies that sanctions could pose a threat to the security of supplies in the region. Gazprombank remains the only authorised institution for processing payments. The banks have indicated that they would be receptive to any solution that would prevent inadvertent violation of US sanctions.

The newspaper's sources indicate that the following options are under discussion in closed negotiations: whether it is possible to legally make payments through Gazprombank's subsidiary in Luxembourg, or whether it would be preferable to use other payment channels.

The EU has been pursuing the diversification of supply sources, including the utilisation of liquefied natural gas from the US, as a recent strategy. Consequently, the proportion of Russian pipeline gas in EU imports has declined from over 40% in 2021 to approximately 8% last year. However, pipeline gas and LNG from Russia combined represent approximately 15% of imports. However, this is in line with the current market leaders.

Norway has become the largest supplier to the EU, accounting for 30% of the market.Plus, the United States, sometimes eager to supply the the European market but only when the price is higher than in Asia, supplied 19% of Europe's gas needs through its LNG exports.
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Following the expiration of Gazprom's five-year transit agreement with Ukraine on 31 December, Russia's share is set to further decline.
However, the outlook for Europe is not positive. Austria continues to source the majority of its gas from Russia via Ukraine. Hungary also sources two-thirds of its gas from Russia, while the Czech Republic has initiated the importation of gas from Russia once again. Furthermore, Serbia is currently in negotiations with Russia with the objective of extending a gas supply contract that is set to expire in March. This is with a view to maintaining Gazprom's current supply volumes, as reported by Bloomberg.
Following the 2022 energy crisis, there was a significant increase in demand for water. As a result, gas prices reached almost 350 euros per megawatt hour (MWh), leading to the closure of numerous plants and a reduction in operations and jobs across Europe. The high cost of gas undermined the competitiveness of many businesses. Despite the recent decline in prices, the situation remains unimproved. 

According to a Reuters report, gas demand in the European Union is currently 17% below the five-year average level observed prior to the pandemic. Meanwhile, gas prices have reached their highest level in a year, with analysts forecasting a further increase. "The issue is that we have become complacent due to the fact that energy prices are currently lower than they were in 2022," stated Svein Tore Holsæter, CEO of Oslo-based fertiliser manufacturer Yara, in an interview with the agency.

Francisco Blanch, head of commodities and derivatives research at Bank of America, has stated that EU gas prices could reach €70 per megawatt-hour next year, up from the current price of nearly €50 per megawatt-hour. By way of comparison, the average EU gas price in the five years preceding the pandemic was €17.58 per megawatt-hour, according to LSEG. 
According to Gas Infrastructure Europe, EU gas storage facilities are currently at 85% capacity, representing a decrease of approximately 10 percentage points compared to the previous year. This already represents a challenging situation for consumers, according to Barbara Lambrecht, an analyst at Commerzbank. The recent cold spell is set to result in a faster depletion of stockpiles than was witnessed during the previous two relatively mild winters. In order to guarantee a sufficient supply, the European Commission has recently increased its storage capacity targets, which could result in further price fluctuations.
Mikhail Zeltser, an expert on the stock market at BCS World of Investments, notes that the gas exchange is experiencing increased price volatility due to conflicting market factors. Following the sanctions against clearing banks for the export of raw materials in the autumn, Russia has established new payment methods for foreign customers. This has led to a reduction in concerns about potential supply disruptions to Europe. However, the situation in the Middle East is becoming increasingly tense, and the risk premium for blue fuel contracts remains high. The possibility of a colder winter in Europe than in 2023 is also being considered, which could result in increased gas withdrawal from storage facilities and support prices at hubs at a high level.

According to the expert, the price of gas is expected to decline from its recent maximum of above $530 per thousand cubic metres to $500. However, this is the technical limit of the decline, and the trend of the instrument is strictly upward. The target for the end of the year-beginning of 2025 remains at $600.

Nikolay Vavilov, a specialist in the strategic research department of the TR company, notes that gas prices declined somewhat by the end of last week. This was due to a significant change in weather conditions, namely warming across most of Europe, as well as high level of occupancy of European underground gas storage facilities at the beginning of December. In absolute terms, this reached 82.5%, representing the highest level observed in the last five years. 
The long-term forecast is not straightforward due to the influence of numerous factors, according to the analyst. The rise in TTF gas hub prices is largely attributable to the cessation of Russian gas transit through Ukraine after 31 December 2024, which the Kyiv authorities have stated they do not intend to reinstate. This has the potential to pose significant risks for European consumers. However, the slowdown in economic growth is limiting demand from the largest gas consumers in the European Union, namely Germany and France. Additionally, there has been an increase in the number of wind turbines and solar panels installed across all European countries, which is reducing the long-term need for natural gas. 

Meanwhile, the winter period has already commenced. Should meteorologists prove accurate in their predictions of low temperatures in Europe in January and February of next year, the current correction of exchange prices for gas is likely to result in an upward trend, with quotes reaching the $600 per thousand cubic metres level," Nikolai Vavilov anticipates. "The population will be using gas intensively to heat their homes." Should the frosts be accompanied by calm and quiet weather, which stops wind generation, then the quotes will reach the $800 per thousand cubic metres mark. Furthermore, a similar precedent has already been set in the Americas, and Europe is now also interested in American LNG. 

Similar trends are evident in Asia, where below-normal temperature forecasts are further stimulating demand. Igor Rastorguev, a leading analyst at AMarkets, agrees that growth is expected to reach at least 5–10% by the end of the year. The primary factors driving this trend are the cold winter, depletion of reserves in storage facilities, and increased consumption for heating.