Russia, Ukraine Gas Agreement Warms Europe Amid Widening Glut

Ukraine, a dominant gas transit hub, reached a supply agreement Friday with Russia, the European Union’s largest outside supplier of the fuel. The decision ends a disagreement between the two that threatened to disrupt flows into Europe this winter, just as homeowners and businesses start firing up natural gas-powered boilers and other heating units.

While the EU-brokered deal will help ensure supply to the 28-nation bloc, its importance has faded. Declining demand, better-connected networks and the potential for the first natural gas imports from the U.S. mean Europe is less vulnerable to the type of cut-offs that led to shortages following similar disputes between Ukraine and Russia during freezing weather in 2006 and 2009.

The deal “has undoubtedly eased some tension,” Nick Campbell, an analyst at Inspired Energy Plc, said in an e-mailed statement. “But with the likely arrival of U.S. liquefied natural gas in the fourth quarter this year, the impact of any dispute is likely to be muted compared to past issues.”

Winter natural gas in the U.K., Europe’s biggest market, tumbled as much as 1.4 percent to 42.27 pence per therm ($6.42 a million British thermal units) on the ICE Futures Europe Exchange. That’s the lowest price for the time of year since 2009 for the contract for the six months through March.

source: Bloomberg