European NatGas Prices Soar As Supply Constraints From Russia Build

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by Tyler Durden
Monday, Jan 03, 2022 - 04:44 PM

European natural gas prices jumped as much as 25% to 80 euros a megawatt-hour, reversing a nine-day slide after increasing concerns about declining Russian gas supplies to the fuel-starved continent. 

"While Russian pipe supply to northwest Europe has been incredibly low since the start of the new year, should this persist in the coming days, this will undoubtedly provide bullish support once demand begins to pick up again," Tom Marzec-Manser, an analyst for European gas and LNG at pricing agency ICIS, told Bloomberg

Russia's gas pipeline bookings remain mute to start the week, indicating markets will stay tight, forcing Europe to eat through depleted inventories. Gas flows exiting Ukraine through Velke Kapusany in Slovakia plunged to lows not seen since early last year. 

 Another transit route for gas is Russia's Yamal-Europe link halted for two weeks. Gazprom PJSC has only been sending fuel to clients under long-term contracts.

European gas prices have been on a wild rollercoaster. A flotilla of US LNG tankers headed toward Europe sent prices tumbling from an all-time high of 180 euros on Dec. 21. The combination of warmer temperatures also helped to pressure prices lower. However, now, the brief period of warm weather appears to be coming to an end later this week. 

Natural gas prices on the fuel-starved continent should remain elevated throughout winter and into spring as supplies are well below adequate levels. Relief is expected once Europe certifies Russia's Nord Stream 2 pipeline, but that might not happen until July.