EU gas surges on disturbance to Russian shipments
Europe faced a tightening squeeze on natural gas after some Russian supplies reversed direction and Algeria stopped shipments to Spain.
Benchmark gas futures surged as much as 15%, before paring those gains as traders weighed lower prices in Asia and Russia's promises to boost supplies against disruptions in some parts of Europe. The market was roiled in early trading as Russian gas started flowing eastward from Germany to Poland, reversing the usual direction. Spain is also getting less gas after a 25-year transit deal to ship Algerian gas via Morocco expired.
European gas futures broke records several times this year as Russia capped flows to the region just as cargoes of liquefied natural gas were diverted to Asia. Soaring energy costs helped send euro-zone inflation to a 13-year high in October, fueling concerns about an economic slowdown. President Vladimir Putin has promised more gas supplies to Europe, but that has yet to flow.
"Gas prices are currently all about signals and especially those being sent from Russia," said Ole Hansen, head of commodity strategy at Saxo Bank A/S. The market is "in flux and still very worried."
LNG prices in North Asia meanwhile fell as moves by China's authorities to raise coal production reduced concern over tight energy supplies this winter in the region.
Russian gas shipments entering Germany's Mallnow compressor station dropped to zero on Saturday, according to data from grid operator Gascade. The Yamal-Europe pipeline was instead sending gas eastward from Germany to Poland, and those flows increased further early on Monday.
Russian gas shipments through Yamal-Europe pipeline, one of several routes used to deliver fuel to the region, were already expected to be capped this month after Gazprom PJSC only booked 35% of the monthly pipeline capacity offered at Mallnow. The reverse flows, however, left traders scratching their heads after Putin signaled a potential increase in supplies from Nov. 8, when Russian storage sites will be full.
Gazprom said on Saturday that it was meeting requests from its European customers in full, and "fluctuations in demand for Russian gas depend on the actual needs of buyers."
The reverse flows suggest Poland is ordering more gas from the west. That's leaving less supplies for Germany, which also receives its fuel via a Baltic Sea pipeline from Russia.
The Polish network operator Gaz-System said on Sunday that there was no demand for gas transit toward Germany. Gascade said reverse flows are not unusual.
"I think Yamal forward flow will rebound after Nov. 8, when Gazprom will start sending gas for refilling European storages," said Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies.
Traders will be watching closely for any signs Russia will top up shipments this heating season. Auctions on Tuesday for pipeline capacity to move Russian gas via Ukraine and Poland will provide clues as to whether Gazprom intends to boost supplies in the first three quarters of 2022.
Russian gas transit to the European Union via Ukraine fell to 57 million cubic meters a day on Nov. 1, down from 86 million a month ago, Gas Transmission System Operator of Ukraine said Monday. Bulgaria halted gas transit to some neighboring countries because of a damaged pipeline.
Spain, which has limited to connections to other European countries, was also facing a supply crunch. Algerian President Abdelmadjid Tebboune ordered a halt to gas flowing to Spain via Morocco amid a diplomatic spat between the two North African nations. He also told state-run energy company Sonatrach not to renew its transit accord with Morocco.
