European benchmark natural gas prices rose on Wednesday for the third day in a row, as gas deliveries from Russia via Ukraine and Poland continue to be low while another cold snap is headed to Europe.
On Wednesday, natural gas prices at the Dutch TTF hub, the benchmark for European gas, rose by 6 percent by mid-day, following a 30-percent jump on Tuesday.
European gas prices reflect growing concerns that Russian natural gas flows to Europe via Ukraine and Poland have been abnormally low in recent days.
Russian gas supply to Europe via Ukraine dropped earlier this week to the lowest daily volume since January 2020. Daily gas transit flows from Russia westward to Europe via Ukraine on Monday were half the amount Russia had booked for that day, Sergiy Makogon, chief executive officer at Ukraine's transmission system operator Gas TSO wrote on Facebook on Tuesday, adding that the drop in transit gas volumes was expected to continue. This is the lowest transit volume of gas Russia has sent via Ukraine since January 2020, Makogon said.
Ukraine has accused Russia of deliberately withholding gas supplies to Europe during the winter months to try to force an approval of the controversial Gazprom-led gas pipeline project Nord Stream 2.
At the end of December, Ukraine's transmission system operator sent a letter to the German Ministry of Economy, in which it says, "we firmly believe that Nord Stream 2 endangers the security of the European Union's gas supply."
Nord Stream 2 awaits approval in Germany and then a review from the EU, which will likely push the in-service date of the pipeline well beyond the current winter heating season in Europe.
Meanwhile, due to the lower transit volumes via Ukraine and the 16th consecutive day on which gas the Yamal-Europe pipeline via Belarus to Poland and Germany flows in the reverse direction from Germany to Poland, natural gas prices in Europe continued to rise on Wednesday.
"There is growing nervousness on the European gas market again... This is chiefly due to faltering pipeline deliveries via Ukraine from Russia," Barbara Lambrecht, an analyst at Commerzbank, wrote in a note cited by Reuters.
"EU gas trades higher for a third day on weak supplies from Russia's Gazprom via Poland and Ukraine, just as temperatures has started to fall again. Watch the March-April TTF spread for signs of storage stress," said Ole Hansen, Head of Commodity Strategy at Saxo Bank.
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By Tsvetana Paraskova for Oilprice.com
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Moreover, Germany’s and the EU Secretariat’s politicizing energy will lead them nowhere. The Europeans will shiver this winter and be forced to pay additional $395 bn in 2022 in higher bills for energy and power prices and will also be forced to eventually certify Nord Stream 2.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London