Page 9 - FSUOGM Week 43 2021

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VTBC attributes energy crisis to strong

gas demand not supply constraints

RUSSIA A surge in gas demand rather than supply limita- range, risking rapid depletion in the event of a
tions is behind the gas crisis unfolding in Europe, frigid winter,” Rystad Energy analyst Kaushal
A narrative has been analysts at Moscow-based VTB Capital (VTBC) Ramesh commented.
gaining traction among said in a research note on October 21. VTBC said the low storage level was “not an
European authorities A narrative has been gaining traction among issue in and of itself ... and if the coming winter
that Russia bears European authorities that Russia bears respon- is just usual, not extremely cold, it will all pass
responsibility for the sibility for the spike in gas and power prices in smoothly,” the analysts said.
spike in gas and power recent months. EU lawmakers are putting pres- “Therefore, we do not think that gas prices
prices. sure on the European Commission to launch above $1,000 per 1,000 cubic metres are sus-
an antitrust case against Russia’s state-owned tainable as they account for a really catastrophic
Gazprom, and the Commission has urged the scenario of extremely harsh winter not only in
company to send more gas. Europe, but globally, as well as the reduction in
By all accounts, Gazprom continues to meet LNG deliveries, which has not been the case so
its contractual supply obligations, although it has far,” VTBC said.
stopped releasing gas onto the spot market. Russia continues to dismiss criticism that
“We would disagree with the statement that it is intentionally withholding gas supply –
the current energy crisis in Europe is the gas whether to drive up prices or convince Euro-
supply crisis,” VTBC said, arguing that demand pean regulators to clear the path for Nord
growth initially drove the increase in European Stream 2’s launch. Russian President Vladimir
gas prices. Putin said on October 20 that the gas crisis
A cold and long winter in 2020-2021, fol- could even hurt Russia, as high prices could
lowed by a hot summer and economic recov- lead to higher inflation, increasing the cost
ery, has spurred a rise in power demand this of food and other essentials. Sustained high
year. Furthermore, coal power plants have been prices could even destroy long-term demand,
retired and wind power output has been poor if it encourages operators to make permanent
this, and gas has had to fill the void, according shifts in generation capacity away from gas to
to VTBC. other sources.
Relatively high gas prices in April-May mean- “This has certain consequences for us, too,”
while deterred companies from stockpiling gas Putin told senior government officials. “If there
in storage, as these companies were hoping for is a fall in demand...this would affect our produc-
lower gas prices this autumn. Instead, prices are ing companies including Gazprom.”
sky high. High prices will also cause fertiliser costs to
As a result, Europe is entering winter with an rise, in turn driving up the cost of food, he said.
historical low amount of gas in storage. “We are not interested in an endless increase
“Europe is heading into winter with storage in energy prices, including for gas,” the president
levels 20% below the low end of the five-year said. ™

Week 43 27•October•2021 www. NEWSBASE .com P9