European natural swung between gains and losses as the market continues to face volatility over the risk of a cut in supplies from Russia. 

Benchmark futures earlier jumped as much as 12%, erasing an 11% decline. Prices are still poised for the biggest weekly drop this year after plunging from record highs in recent days.

“Such fluctuations just show there is a tension in the market, and people are having a hard time in assessing the impacts the war in Ukraine will have on gas supplies,” said Niek van Kouteren, a senior trader at Dutch energy company PZEM. “It shows no one has a clue of what is going on.”

Earlier Friday, the market was seeing a reprieve after Russia excluded energy and raw materials from an export ban on more than 200 products. The country is the European Union’s biggest gas supplier, accounting for about 40% of imports, and the bloc is trying to tap all available resources to reduce this dependence. 

Europe’s gas market has experienced unprecedented volatility following Russia’s invasion of Ukraine last month and subsequent international penalties designed to isolate Moscow.

While Russian gas shipments crossing Ukraine continued as normal on Friday, any prospect that the attacks will intensify could pose risks to Europe’s supplies, according to van Kouteren. Russian President Vladimir Putin said he would bring in fighters from the Middle East, though he later cited “positive movement” in talks with Ukraine. 

International Sanctions

Any sanctions on Russia that could also hit European economies hard should be avoided, the EU climate chief Frans Timmermans said on German radio. “We have to make sure that we make things hard for Putin but prevent our society from being weakened,” he said. 

Timmermans added that the continent could cope with a potential curb on Russian gas exports. 

The export restrictions Russia announced Thursday aren’t likely to have much effect on the country’s trade and focus on sectors where Russian goods aren’t globally significant, analysts from Citigroup Inc. said in a report.

“We read this as a warning that further escalation in the use of economic instruments by the West could lead to more meaningful restrictions on commodities,” they said. 

Energy Crunch

Europe was in the midst of an energy supply crunch, due to low gas inventories, before the war, and prices for the fuel have been elevated since late last year. 

Vessels hauling liquefied natural gas continue to reach European ports to help to alleviate the shortage, with those from the U.S. leading the way. A total of 28 U.S. LNG cargoes are set to arrive this month until March 24.

Milder weather forecasts have also helped to keep gas prices in check in recent days, with above normal seasonal temperatures seen across most of northwest and central Europe, according to Maxar. 

Still, traders remain on edge. Earlier this week, Russian and Ukrainian officials exchanged warnings about the risk to gas transit infrastructure as Russian troops entered stations that pump the fuel toward Europe. Russia also threatened to cut supplies of natural gas via the Nord Stream 1 pipeline to Europe. 

Dutch front-month gas, the European benchmark, traded 0.7% lower at 125.50 euros per megawatt-hour by 1:45 p.m. in Amsterdam. The contract is poised for a weekly loss of about 35%. German front-month power declined 7.7%, paring earlier losses.