Prices at European gas exchanges continued to march up this week, propped up by grim predictions of power outages this winter and a new delay in starting operations of Russian gas export pipeline to Germany, Nord Stream 2.
Contracts for deliveries of gas in December, January and February rose by 5% to almost $1200 per 1,000 cubic metres at Europe’s largest trading hub in the Netherlands earlier on Wednesday.
Markets have been digesting a grim outlook from one of world’s largest commodity traders, Trafigura, that Europe will face increasing risk of rolling power outages this winter if cold weather persists for long time on the continent.
Speaking at the FT Commodities Asia Summit earlier this week, Trafigura chief executive Jeremy Weir said there is still insufficient supplies of natural gas in European storage, despite the promise of increased flows from Russia.
Weir added that the oil market also remains “very tight” and a lack of investment in new upstream projects mean that “a three-figure number” for oil is “well and truly on the cards”.
According to Gazprom, Russian supplies to Europe, flowing across Ukraine, returned to the daily contracted volume of 109 million cubic metres of gas (MMcmd) on 11 November after the significant drop in October and the beginning of November.
However, deliveries to Poland and Germany via the Yamal Pipeline, running across Belarus, remained at about 50 MMcmd, or just about half from levels that were seen earlier this summer.
According to reports in Ukraine and Poland, Gazprom has refused to book any additional available spare capacity of transit pipelines in these two countries that was offered for December and the first quarter of 2022.
The Russian gas giant has not made public any reaction to the delay in the certification of its new pipeline project, Nord Stream 2, in Germany that was announced yesterday.
Despite opposition from several EU members, hope has remained strong in Europe that the certification of this controversial project will lead to higher gas deliveries from Russia.
According to reports in Moscow, Russia now expects the Nord Stream 2 certification to be completed in between two and six months' time.
Ukraine, which together with Poland, has strongly criticised the pipeline project, has welcomed the delay in its certification and thus its eventual start-up.
Ukraine's transit offer
However, Ukrainian gas transmission authority Operator GTS had reiterated that the country has ample unused transit shipment capacity to bring more gas from Russia to Europe if Gazprom decides to increase supplies.
According to Operator GTS' managing director Sergey Makogon, Gazprom is currently using the contracted shipping capacity to Europe of 109 MMcmd, despite that just two years ago the monopoly transited 277 MMcmd of gas to the continent.
Contrary to continued pronouncements from the Kremlin that Ukraine’s gas pipeline network can not handle any further increase in gas transit supplies from Russia, Makogon has argued that the system has been properly invested and maintained in recent years.