Wholesale gas prices fell in Europe today after Russian gas flows to Germany resumed yesterday, raising hopes that Moscow is beginning to meet its commitment to increase supplies and alleviate shortage concerns as winter approaches.
Russia began supplying gas to Germany late last night via a pipeline starting from Siberia’s Yamal, a day after a halt in exports boosted prices in Europe. Later, the flow of gas increased to the highest level in two weeks, according to German data.
Today, Russia’s Gazprom announced that it has launched a program to replenish European gas reserves, the extremely low level of which has helped boost prices in recent months.
“Gazprom has approved and started the implementation of the gas pipeline plan in five European underground storage stations,” the Russian giant told the Telegram, without specifying whether the process has started and in which countries the facilities are located.
“The volume and routes for transporting gas have been defined,” Gazprom said.
Although wholesale prices in the European Union and Britain have fallen, analysts say a further drop in prices will depend on whether Moscow takes more steps to allay Europe’s concerns and how cold this winter will be.
“So, until the concerns are removed, prices will remain high,” predicts Energy Aspects analyst Trevor Sikorski.
Dmitry Marichenko, director of Fitch, estimates that Gazprom will have to pump about 170 million cubic meters a day for a month – an increase of one-third of current flow – to pay for European reserves.
“For such a serious increase in power supply, Gazprom will have to commit additional capacity through Ukraine – the Yamal-Europe and Nord Stream 1 pipelines are not enough,” said Dmitry Marichenko.
Europe, which is dependent on Russia for a third of the gas it uses, has been facing price spikes for months due to increased demand due to the economic recovery following the improvement in the epidemiological situation.
Some countries blame the crisis in part on Moscow.
Gas prices fell in late October when Russian President Vladimir Putin instructed Gazprom to increase deliveries to the European Union after Russian reserves were depleted.
Gazprom CEO Alexei Miller later clarified that the group was going to pay for Russian reserves before November 8.
In Europe, gas reserves are at their lowest level due to the prolonged winter of 2020 and the subsequent non-recovery. Added to this is the lower efficiency of renewable energy sources, such as wind, for meteorological reasons.
According to Moscow, the European Union had in recent years preferred spot gas markets, which mean price fluctuations, instead of signing long-term, multi-year contracts with Gazprom.
Russia says it intends to send more gas, but wants to return to the practice of multiannual gas supply agreements.
In the West, accusations have been leveled against Moscow for deliberately putting prices under pressure to blackmail the acceleration of the launch of the new Nord Stream 2 pipeline.
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