Page 6 - FSUOGM Week 05 2021
P. 6
FSUOGM COMMENTARY FSUOGM
Russia's Gazprom shows record
exports in January
Cold weather was the driving force behind the growth in Gazprom's sales
RUSSIA RUSSIA'S natural gas giant Gazprom reported
record-high exports of 19.4bn cubic metres of
gas to Europe and China in January 2021, mak-
ing a 45% year-on-year growth, the company
said.
Notably, the export flow to China was 2.5%
above contractual obligations and soared 190%
y/y. The preliminary estimate for gas produc-
tion in January 2021 is 47 bcm, making 6.4% y/y
growth.
"Strong operating results had already been
expected for January-February, taking into
account the cold weather and strong demand
in both Asia and Europe," Sberbank CIB com-
mented on February 2.
While the y/y export growth figure was
driven mainly by a low-base effect (January 2020
saw demand drop on warm weather and storage
in Europe being full because of Ukraine transit
uncertainties), Gazprom exports in January
2021 were still above those in January 2017-19
by 3-11%, Sberbank CIB analysts estimate.
January's gas deliveries to Europe were 5-8%
higher than in January 2018-19, but 1% below
January 2017.
"In any case, the 6.5 bcm rebound in Gaz-
prom's gas exports in January should make a
substantial contribution to the 1Q21 and full- settled in over North-Eastern China, South
year results, as it represents a full 3.6% of Gaz- Korea and Japan in December and January
prom's total exports last year (179 bcm)," the caused a shortage in the LNG market, pulling all
analysts at Sberbank CIB believe. available gas from Europe and elsewhere," BCS
BCS Global Markets on February 2 com- GM analysts argue.
mented that the record-high exports volumes This was exacerbated by a colder January in
and higher prices in Europe should support Gaz- Europe on a y/y basis, driving up demand there
prom, seeing the news as positive and affirming a versus January 2020, they add.
Buy recommendation on Gazprom's shares. Second, Chinese deliveries were almost at
In December 2020 BCS Global Markets 1 bcm (according to Interfax), up from very
"enthusiastically confirmed" a Buy call on low levels in January 2020, as exports via the
Gazprom. The analysts noted that Gazprom's Power of Siberia pipeline had only begun in late
exports are recovering faster than expected after December 2019, BCS GM writes.
a tough year, with European exports seen return- Looking forward, VTB Capital (VTBC) ana-
ing to normal by 2023. lysts on February 2 suggested that the current
"The [January] dynamics should set the tone hydrocarbon futures curves (oil, oil products,
for a stronger year for Gazprom, which should gas) might imply a dividend yield of more than
see not only increased sales volumes but also 10% being delivered by Gazprom’s shares for
pricing. We view the reported increases as posi- 2021 (paid in 2022), while also affirming a Buy
tive, and we think the drawdown of gas in under- recommendation for the company's shares.
ground storage should help bring more balance VTBC in December 2020 also upgraded
to the market," Sova Capital commented on Feb- the investment case on Gazprom, noting that
ruary 2, also affirming a Buy call on Gazprom. the entire gas futures price curve is moving up
"High exports were driven by cold weather and that the company's shares are yet to reflect
and a new export route: first, the deep cold that this.
P6 www. NEWSBASE .com Week 05 03•February•2021
