Page 14 - FSUOGM Annual Review 2021

FSUOGM JUNE FSUOGM

Gazprom reportedly withholds

gas supplies to drive up

European prices

Industry participants say the company is behnd the price spike in Russia, but

others point the blame at Ukrainian transit policy

EUROPE RUSSIA’S Gazprom is exacerbating shortages on executive at a German energy company told the
the European natural gas market by withholding FT. They’re just being opportunistic.”
WHAT: extra supplies, the Financial Times reported on Gazprom has denied having such an agenda,
Gazprom is intentionally June 24. issuing a statement saying it “supplies gas pre-
withholding gas supplies Europe’s gas market has grown unusu- cisely in line with consumers’ requests.”
to drive up prices in ally bullish in recent months, with spot prices “It is based on those very requests as well as
Europe, according to recently surging to $360 per 1,000 cubic metres, the possibilities for portfolio capacity optimi-
the FT. But not everyone which is unusually high, especially for summer, sation that the company books transportation
agrees. when there is little need for heating. In fact, capacity in particular directions,” Gazprom said.
the recent heatwave has driven up electric- This marks a key shift in strategy for the
WHY: ity demand for cooling purposes. Prices were Russian giant, which has traditionally focused
The strategy makes already unusually high at the end of winter, in expanding its market share at all costs rather
commercial sense, after several months of cold temperatures and than maximising revenues. Its new policy mir-
although some industry restricted LNG supply. They are now at their rors that of Russia and its OPEC+ partners, who
participants have highest point since 2008, weighing down on have reined in oil supply over the past year to
suggested that Gazprom the post-coronavirus (COVID-19) economic push up prices.
is putting pressure on recovery. Naturally, Gazprom alone is not responsible
the EU to let Nord Stream But while Gazprom has plenty of spare pro- for the bullish conditions that have appeared on
2 go ahead. However, duction capacity to meet soaring demand in the European gas market. Besides the cold winter
others note that Ukraine Europe, its pipeline exports to the continent and hot summer, demand has been bolstered by
has been limiting Russian have instead dropped by roughly one fifth in the rising cost of EU carbon allowances, which
transit capacity. 2021 versus the pre-pandemic level, according have grown to €50 ($60) per tonne, encouraging
to the FT. Gazprom is abiding by its contractual utilities to switch from coal to cleaner gas-burn-
WHAT NEXT: obligations, energy executives and analysts told ing power generation.
While the Biden the newspaper, but it is reluctant to increase vol- The gas market is also tight in Asia, where
administration appears to umes further through spot market sales. The LNG spot prices are traditionally at a premium
have eased its position on company could simply be acting out of business to those found elsewhere. This has encouraged
Nord Stream 2, multiple sense. Why send more gas if doing so will push LNG exporters to divert more shipments away
obstacles could yet derail prices down and result in fewer earnings? from Europe and towards Asia.
the controversial pipeline “Gazprom is just trying to maximise its prof- The spike in gas prices is obviously bad news
project. its at a time when spot prices are high, gas storage for European economies, undermining the
is empty and LNG demand in Asia is strong,” one post-pandemic recovery. And the shortages

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