European gas falters as traders assess Putin’s payment plan

Natural gas prices in Europe fluctuated as traders weighed the potential impact on the market from Russia’s decision to switch to rubles to pay for its supplies, with colder weather also expected to boost demand.

Enchmark gas futures fell after rising as much as 5.6 percent earlier Friday.

President Vladimir Putin’s call for fuel to be paid for in rubles has been floating around for days, and traders are keen to see how that might affect flows.

Foreign buyers must open special ruble and foreign currency accounts with Russia’s Gazprombank JSC to process payments, according to a Kremlin decree on Thursday.

Russia said flows to Europe are continuing, but the lack of details about the new mechanism has left buyers scratching their heads amid uncertainties about the impact on contracts. Many consumers are still waiting to undo the move.

“All eyes are now on what will happen and whether a total halt to Russian gas exports will actually become a reality,” Danish energy company Energy Danmark said in a report on Friday.

Deliveries of Russian gas to Germany via the Yamal-Europe pipeline halted on Friday after only resuming on Wednesday.

Fuel also began to flow to Poland in the reverse direction.

However, supplies via Ukraine are expected to remain close to the maximum that Russia’s Gazprom can deliver under its transit deal with the country.

Demand is expected to increase as colder weather rolls in. Temperatures will be below normal in most parts of Europe early next week, Maxar said in a report, raising the risk that the market could tighten much again.

Dutch gas for the next month fell 3.9 percent to 121 euros per megawatt-hour as of 9:37 am in Amsterdam. Prices had their biggest monthly gain since November in March.