Following several days of declines, natural gas prices at the key European and UK hubs surged again on Monday, after gas flows on the Yamal-Europe pipeline from Russia reversed the direction eastward instead of westward through Germany.
Grid operator Gascade said, as quoted by Bloomberg, that flows of natural gas at the Mallnow entry point in Germany of the Yamal-Europe pipeline had dropped to zero on Saturday. The pipeline was instead sending gas east—from Germany to Poland.
This caught traders and analysts by surprise on Monday, especially after Russia signaled last week that its gas giant Gazprom would start filling its storage sites in Europe in a few days.
Russian President Vladimir Putin told Gazprom’s CEO Alexei Miller on Wednesday that as soon as the Russian gas giant completes filling Russia’s underground storage by or on November 8, “I would like you to start consistent and planned work on increasing the amount of gas in your underground depots in Europe – in Austria and Germany,” per the English translation on the Kremlin website.
“In addition, this will create a favourable situation, at any rate, a better situation in the European energy market in general,” Putin said.
The comments were interpreted by the market as a promise from Putin that Europe would soon see the gas crunch alleviated, and natural gas prices plunged at the end of last week. Related: Oil, Gas Rally Lifts Chevron’s Quarterly Profit To 8-Year-High
At the start of this week, however, the market continues to be sensitive to signs of how soon Russian supply could be increased. The reversal of the natural gas flows from Germany eastwards instead of westwards sent Europe’s gas prices rallying again.
“The drop in Mallnow flows is unexpected, the entry capacity into Mallnow was booked at 324 GWh/d (gigawatt hours/day) for November in line with October, so the market expectation was rather to see flows close to October level,” Refinitiv analysts wrote on Monday, as carried by Reuters.
As Europe enters the heating season with natural gas inventories at the lowest level in a decade, policymakers, consumers, and industries are left at the mercy of the weather, hoping for a mild winter to avoid further tightening of the already tight European gas market.
By Tsvetana Paraskova for Oilprice.com
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