Natural gas prices in Europe declined since midweek following Russian President Vladimir Putin’s order to Russian state-run gas producer Gazprom PJSC to start refilling European gas storage facilities next month, a measure that should ease pressure on the European gas market. Gazprom is Europe’s biggest gas supplier.
Signs that Russia’s Nord Stream 2 pipeline is nearing certification in Germany also contributed to gas price easing.
Putin told Gazprom to focus on filling underground storage in Germany and Austria starting Nov. 8, a day after the gas supplier completes filling domestic storage facilities, according to a Bloomberg report on Oct. 27.
All gas storage sites in Germany – Europe’s biggest market, and where Gazprom has several storage facilities – are about 71 percent full, according to the report, citing Gas Infrastructure Europe data. Gas storage inventories across Europe as a whole are at their lowest seasonal level in almost a decade.
Current benchmark gas prices in Europe have surged repeatedly to record levels in recent weeks, forcing several major nitrogen fertilizer producers to curtail their European ammonia production – and in some cases, their downstream production.
The falling gas prices cannot come soon enough for the European nitrogen industry. The high prices idled production and jolted fertilizer prices, which had already seen significant across the board increases this year. “Unless agriculture prices rally significantly, nutrient demand destruction is certain at these price levels,” said Alexis Maxwell, Green Markets Director of Research. “Farmers should transition management from chasing yields to chasing the dollar.”
The benchmark European gas futures – the Dutch TTF gas futures front-month contract (November) – were trading at €75.3 a megawatt-hour at 3:59 p.m. (GMT) on Oct. 28, down from about €88 a megawatt-hour on Oct. 26, or about $1,150 per thousand cubic meters.
The benchmark European futures price had reached as high as €162 a megawatt-hour earlier this month, or about $2,000 per thousand cubic meters, according to Bloomberg.
Europe’s gas rally also had eased mid month on Putin’s first indication of possible increased Russian gas supplies to the region (GM Oct. 15, p. 31), but gas prices subsequently increased again.
Russia wants natural gas prices in Europe to come down by about 60 percent in the longer term as a prolonged rally will destroy demand for Gazprom’s supplies, Bloomberg reported, citing two unnamed officials with knowledge of the country’s energy policy.
Gazprom last year supplied nearly a third of all natural gas consumed in Europe. But its exports to Europe have been lower year-over year since late August, with some European officials blaming the Russian gas producer for contributing to the continent’s current energy crisis
Russia wants prices in Europe to be about $300-$400 per thousand cubic meters, the so-called “sweet spot” it believes would help the Russian state gas supplier to keep its grip on Europe’s market. Bloomberg cited another Russian official as putting the desired price range at $200-$400 per thousand cubic meters, with prices at the low end of that range being a less acceptable scenario.
Gazprom at the start of this week reported that it was maintaining its 2021 forecast of exports to Europe and Turkey at 183 billion cubic meters, Russia’s Prime Business news agency reported, citing the head of the export branch of Gazprom Export, Yelena Burmistrova, as quoted by the company’s corporate magazine. The supplies to Turkey are planned at 24-25 billion cubic meters in 2021.
Meanwhile, Bloomberg reported Germany’s Economy Ministry said late Oct. 27 certification of the Nord Stream 2 pipeline from Russia would not pose any risks to security of supply, bringing the project that is seen as boosting Europe’s gas supplies this winter a step closer to final approvals. The regulator has until early January to make a preliminary decision.