Russian Gas Supply to Europe Faces Disruption Risk, OMV Warns
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(Bloomberg) -- OMV AG warned Russian natural gas supplies may be disrupted as the company intends to stop paying for imports from Gazprom PJSC to recoup damages it won in arbitration. European futures surged to the highest in a year.
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OMV doesn’t expect Gazprom to pay the €230 million ($242 million) award, which could prompt the Kremlin-controlled company to halt supplies and may boost reliance on costly liquefied natural gas.
Europe’s gas market has been particularly sensitive to disruptions since the 2022 energy crisis, with supply outages liable to jolt prices. Futures have climbed in recent months on gathering risks to flows, and the threat of an imminent Russian cutoff increases the strain just as the heating season gets underway.
Much of the region has weaned itself off Moscow in recent years, with Austria — OMV’s home market — and Slovakia the main remaining importers of gas piped via Ukraine. These flows are expected to end Dec. 31 unless an alternative arrangement is made with Kyiv.
While Gazprom has also been involved in arbitration with other European clients such as Uniper SE and Eni SpA, this is the first time a company has said it could divert its payments to recover arbitration awards.
Payments for supplies are likely due by the 20th of the month, if previous deadlines are any guide.
“Given that OMV has said it will immediately seek to recoup the award, it’s possible it will withhold its payment to Gazprom for the deliveries it received in October,” said Tom Marzec-Manser, head of gas analytics at ICIS. “It’s a tense time.”
OMV said it can meet supply obligations via alternative sources in the event that Russian deliveries under its long-term contract are obstructed. Gazprom declined to comment.
“Austria can and will manage without Russian gas,” Energy Minister Leonore Gewessler wrote on X. “Nevertheless, it is clear that a sudden interruption in supply could cause tension on the gas markets.”
Benchmark futures settled 5.9% higher at €46.22 a megawatt-hour, the highest level in almost a year. The increase was the biggest gain since May.
“The timing of this makes the market more volatile than if they had taken the decision to halt supplies from Russia months ago,” said Florence Schmit, a European energy strategist at Rabobank. “Prices have been reacting to this lack of clarity about where this is going.”