Moscow has fired a second volley of gas disruption at Europe after placing sanctions on Gazprom units and dozens of other companies.

Here is Rystad Energy’s regular gas and LNG note from senior analyst Kaushal Ramesh:

Moscow has fired a second volley of gas disruption at Europe causing fresh uncertainty and spiking prices by placing sanctions on Gazprom units and dozens of other companies based in countries that have imposed sanctions on Russia since the start of its war in Ukraine.

This follows a May 3rd decree by Russia that forbade dealing with sanctioned entities, or even fulfilling contractual obligations.

This latest escalation has caused a fresh bout of uncertainty with a corresponding jolt of price volatility with the TTF M+1 surging to a high of 15% or 115 EUR/MWH since opening at over 100 EUR/MWH today.

Current gas contracts could be deemed null and void because of this decision and supplies could be stopped unilaterally by Gazprom, citing a regulatory order outside of their control.

The chances of this happening are slim, but not zero and will hasten Europe’s scramble to arrange for additional LNG, speed up plans for a buyer’s alliance and potentially consider demand side measures such as gas rationing.

There is historical precedent for Gazprom stopping gas flows as they did several times between 2005-2014 and the ongoing tensions between the Gas TSO of Ukraine and Gazprom are setting the scene for a repeat.

The silver lining here is that EU buyers are not caught completely off guard.

Storage levels are currently sufficient to last through most of 2022, even if Russian flows were to stop instantly, barring any unexpected weather events - but the outlook for winter 2022 supply is now a lot more pessimistic.

Under the sanctions, 31 companies were banned by the Russian government from conducting transactions and entering Russia ports including Gazprom Germania and other ex-subsidiaries of Gazprom PJSC, and Europol Gas -– the owner of the Polish part of the Yamal Europe pipeline.