Natural gas prices skyrocket as Putin Punks Europe

At the end of October, the market rejoiced and natural gas prices threw up (although we warned that this was just the last joke the Kremlin was playing at the expense of gullible Europe) after the news that the Russian President Vladimir Putin had asked Gazprom to “gradually” increase volumes to Europe. from November 8. Fast forward to November 8, which is today when not only is there no more gas being shipped to Germany via Russia’s Yamal Anchor Pipeline from today ‘ yeah …

… but there are No sign the continent will get relief anytime soon, with Gazprom just a few moments ago tightening the proverbial (and literal) pressure on Europe’s gas supply:


Today’s squeeze follows a supply shock on Sunday, when no additional capacity to send additional supplies to Europe was reserved for auction. It’s a disappointment for traders who relied on Gazprom to follow Putin’s orders to ease the continent’s supply crisis.


Natural gas prices have more than tripled this year as Europe started the heating season with the lowest stocks in more than a decade. Russia had capped its supplies, but traders were hoping for relief after Putin ordered Gazprom to send more gas to Europe from November 8, when national storage sites were due to be full. Meanwhile, after peaking above € 160 and then falling back to € 60, Dutch natural gas futures have resumed their steady ascent as the prospect of a freezing European winter becomes very real again.

“If Russia does what Putin said it will do, then there will be great relief,” said Frank van Doorn, head of trade at Vattenfall, in an interview at the Flame gas conference in Amsterdam this week. last. “If there is no more gas coming on Monday, we could see a significant price spike.”

It is precisely this point that begins to emerge.

Another sign that Europe will not see any relief on Monday is the result of a series of auctions for pipeline capacity. Gazprom did not reserve any of the spaces offered at the Sudzha and Sokhranovka entry points on the border between Russia and Ukraine. No additional capacity has been reserved either for the Mallnow station in Germany, which handles Russian gas via Belarus and Poland. And then, as noted above, on Monday Gazprom again opted against sending more gas to Europe via Ukraine.

As Bloomberg notes, shipments via these routes have been well below capacity so far this month. To make matters worse, Russian gas was flowing eastward from Germany to Poland for the second time since last weekend, the reverse of the normal direction.

In any case, European gas prices are expected to increase further in the coming days: without the volumes promised by Putin, there are fears that the market will take off again, with storage levels on the continent well below normal. as the winter heating season begins.

Indeed, as Goldman wrote on Sunday night, after the initial sale of $ 8 / mmBtu in TTF to less than $ 22 / mmBtu following Russian President Putin’s statement last week that Russia would increase gas shipments. to Europe from November 8, TTF prices rallied to $ 25 / mmBtu as supply uncertainty remains.

And while Goldman believes Russia “will likely increase flows to northwestern Europe from this week to some extent,” the bank does not expect a full normalization of flows immediately, and as a result , “we believe that the destruction of price induced demand remains necessary for the storage of the balance in the coming months.”

Specifically, as Goldman concludes, “If Yamal’s throughputs don’t average at least 60 mcm / d as of this week, which they clearly do not, Goldman believes the TTF will recover to $ 30 / mmBtu to limit demand for gas, especially since current weather forecasts for northwestern Europe indicate the third week of November being significantly colder than average. “

And while soaring prices are a nightmare for frosty European citizens, it is a blessing for the nation that is clearly in control of Europe’s heat for the next 4 months.


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