Drone attacks on Russian infrastructure increases market to new highs

Gas prices at Europe’s three most liquid gas hubs surged on Wednesday amid reports of Ukrainian drone strikes deep within Russia.

Sharp gains of circa 7p/therm (0.24p/kWh) were posted across the front-month and front-season contracts, as geopolitical instability in the region resurfaced as a key source of increases across the energy markets.

Unverified news reports of widespread Ukrainian drone strikes against Russian energy infrastructure emerged during morning trade and continued to feed bullishness into the curve across the entire session.

Ukrainian news media said early on Wednesday that four drones had struck and severely damaged a Lukoil refinery in the Nizhny Novgorod oblast (approximately 500 miles from the Ukrainian border) the second strike of its kind in less than a week. It was also claimed that drones attacked a pumping station serving a major supply route connecting key Russian oil infrastructure.

Upward revisions to demand forecasts may have helped to intensify the pressure. According to the latest run of our 14 day model, demand is expected to hold just above seasonal norms until 4th February, from there the supply and demand balance may tighten further as levels rise to significantly above average until at least 12th February.

The NBP has opened firm this morning, with the Summer 25 front-season contract currently being offered circa 1.5p/therm (0.05p/kWh) above its previous settlement at time of writing, crystallizing yesterday’s increases and trading at the highest level since February 2023.

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Price commentary courtesy of Crown Gas and Power