Russia’s February gas-transit plan leaves Europe in the lurch

Elena Mazneva, Dina Khrennikova and Olga Tanas 1/18/2022

MOSCOW (Bloomberg) --Russia is keeping Europe’s natural gas market on edge, with no relief in sight from the country’s preliminary supply plans for next month.

The nation’s exporter, Gazprom PJSC, again opted not to book any extra pipeline space to ship the fuel westward through Ukraine during a monthly auction on Monday. On top of that, zero capacity was booked for February to deliver gas to Germany via the Mallnow station, where Russia’s Yamal-Europe pipeline terminates.

Benchmark Dutch front-month gas briefly pared losses after the auctions but still traded down 4.2% at 83.31 euros a megawatt-hour by 12:05 p.m. in Amsterdam. Prices dropped as much as 7.8% earlier.

Europe is grappling with its worst energy crisis in decades. The continent’s gas inventories are at the lowest on record for this time of year, with the heating season far from over.

While shipments of liquefied natural gas from the U.S. have helped the region recover somewhat from lows earlier this winter, flows from top fuel supplier Russia remain far below normal. Concerns of a possible military action in Ukraine are also adding to uncertainty about Russian energy exports.

“Auction results today will be particularly difficult to interpret,” Tom Marzec-Manser, an analyst for European gas and LNG at ICIS, said before the auctions.

Last month, Gazprom booked about 21% of Mallnow’s capacity for January, yet there’s been no flow so far this month. Current supplies via Ukraine are also far below the 109.6 million cubic meters a day that Gazprom can send under its long-term transit contract. Russia has said this is due to lower demand from European buyers.

“So it’s clear monthly bookings are no longer a good indicator of what might occur,” Marzec-Manser said.

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