Prices for spot gas deliveries in the period between December and February have tumbled in recent days following new supply promises from Russian President Vladimir Putin and indications that gas monopoly Gazprom has resolved a supply crunch with Moldova.

Gas futures in the UK and the Netherlands retreated by about 25% from levels seen a week earlier, as political moves apparently outweighed the fundamentals of a continued decline in Russian gas supplies to the continent.

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The positive mood was set when Putin publicly ordered Gazprom to concentrate on increasing gas deliveries to Europe after Russia's 8 November deadline for using underground storage facilities.

Accounting for about one third of European pipeline gas imports, many industry analysts believe Gazprom has ample scope to ease the energy supply crunch facing Europe because of vast gas reserves under its control in Russia and surplus pipeline capacity.

The monopoly has been quick to react to Putin’s instruction, issuing a late statement on Friday that it has already replenished domestic storage to about 72.6 billion cubic metres, about 0.3 Bcm above the level seen one year ago.

However, the monopoly implied that it will not immediately switch flows to export destinations. “The injection of gas into underground storage [in Russia] will continue until 8 November”, its statement said.

Moldova crisis averted

Gazprom also agreed to sign a new five-year gas supply agreement with Moldova, a nation that declared a plan to embrace more European values two years ago, but remains heavily dependent upon Russian gas supplies, importing about 3 Bcm of gas each year.

A previous agreement expired on 1 October, and both sides were locked in difficult negotiations, with Gazprom insisting on Moldova paying an old debt with accrued interest and penalties of about $700 million, or face disconnection from 1 December.

According to Moldova's deputy prime minister Andrey Spynu, the agreed price formula for the new contract implies the country will receive gas at the average price of $450 per 1000 cbm in November.

Gazprom has also removed its insistence on obtaining the firm commitment from Moldova to pay the debt, with both sides agreeing to an independent international audit of the country’s gas importer and the agreement’s signatory, Moldovagaz, where Gazprom has the controlling interest.

Russian gas supplies decline

However, there was no immediate indication that gas deliveries from Russia started to increase over the weekend.

German transmission operator Gascade disclosed in its Network Transparency Platform that Russian gas deliveries from Poland to Germany via the Yamal Pipeline fell to zero on 30 October.

The Yamal Pipeline runs from gas fields in West Siberia across Belarus and Poland and has an annual shipping capacity of over 30 Bcm.

Gascade said on Monday that the Yamal Pipeline has reversed the flow, increasing gas hourly shipments from Germany to Poland by over three times.

Declining Ukraine transit shipments

The head of Ukraine's gas transmission authority Operator GTS Ukrainy, Sergey Makagon, posted a social network message this week stating that Gazprom reduced hourly transit to Europe across the country to the equivalent of 57 million cubic metres of gas per day in early hours of 1 November.

Gazprom has a contractual obligation to ship at least 109 MMcm of gas via Ukraine in 2021 but deliveries averaged at 86 MMcm in October.