The Ukraine war offers energy arbitrage opportunities

Europe had weathered one winter since Russia’s invasion of Ukraine in 2022. But although gas prices had returned to Earth, they were sure to rise in the colder months to come. Thus if commodity merchants bought at rock-bottom rates in the summer, they could offer future delivery at much higher prices on the forward market. To make the deal work, all they needed was somewhere to store the product. The EU’s underground capacity was almost full; parking the gas in tankers offshore would have been expensive. Their solution was unorthodox: pumping 3bn cubic metres (bcm) of natural gas eastward to Ukraine.