The natural gas prices declined in Europe as Russia increased supplies after holding them throughout the year.
As the gas supplies to Europe increased via Poland and Ukraine, the Benchmark Dutch energy futures fell by 12% on Wednesday.
Russian State-owned Gazprom PJSC booked pipeline capacity on the Slovakian-Ukrainian border to supply neighbors through the long-term transit route agreement.
With Europe starting its heating season with the lowest inventory in a decade, any extra gas supply is welcome. Late last month, President Putin said that Gazprom would refill its storage capacity in Europe after Russia completed Monday it’s domestic stockpiling.
A senior analyst with Rystad Energy, Emily McClain said, “Traders nerves and prices have calmed after a volatile week with the resumption of gas supplies from Russia to Germany at Mall now and storage at Rehden“.
Gas traders observe every move by Russia, Europe’s top supplier focussing on the extra gas delivered beyond contracted volumes. The demand for additional shipment will materialize after seeing how the December pipeline capacity auction runs until the following Monday.
The certification of controversial Nord Steam 2 pipeline progress will give direction to Gazprom for additional booking as per analysts.
Despite the increase in Russian supplies after a slump, deliveries remain below normal during this time of the year.
According to Sergiy Makogon, the head of Ukraine’s Gas Transmission System Operator, Gazprom is not helping as the transit through Ukraine is much lower than last year. He says that Gazprom decreased the gas supplies from 124 million cubic meters daily transit to 54-million-cubic meters and now has increased it to 109 million cubic meters promoting it as the major increase of supplies to Europe.
The benchmark gas futures in Europe fell to 66 euros per megawatt-hour, down by 9.1% in Amsterdam, whereas its U.K. equivalent fell by 11 % to 166.5 pence per therm.
The lower gas prices had an effect on power as the benchmark German annual electricity futures dropped to 105.8 euros per megawatt-hour, down by 7.4%. The monthly futures fell by 12 % amidst forecasts for mild weather for most of Europe in the coming weeks. The cold weather is expected by the end of the month.
According to Makogon, the gas pipeline capacity for Europe was booked for 19 million Cubic meters by Gazprom through Ukraine. The results on Tuesday auction in the supplies at 109 million cubic meters per day, which is in line with the transit agreement valid till 2024.
The gas supplies into Germany Mallnow, a key hub in the European market via a pipeline from Poland, increased for the second day in a row. However, it remains one-third of the normal levels.
To protect the Russian economy from the adverse effects of the natural gas crisis, President Putin is expected to hold a government meeting.
The market will pick up on any comments from the Russian leader as prices tumbled when he intervened twice last month. In the meantime, Russia has forecasted a 12 % growth from 2020, with gas production set to increase to 777 billion cubic meters, according to its energy minister Nikolay Shulginov on Wednesday.
