UK and European gas prices rose nearly 18 percent on Monday after Russia’s Gazprom dampened hopes for additional supplies over the next month, despite indications from President Vladimir Putin that more may follow.
A highly anticipated pipeline capacity auction held on Monday, with traders looking for evidence of increased shipments, showed no increase from Russia, either through the Ukrainian pipeline or lines running through Poland to northwestern Europe.
“[The auction results were] same as last month, so expect flat flows in November, ”said Tom Marzec-Manser from consulting firm ICIS.
The European gas benchmark contract for delivery in November rose 17.7 percent to € 104 per megawatt hour, while the corresponding UK contract rose more than 15 percent to £ 2.71 per boiler.
Putin and Kremlin officials have hinted in recent weeks that Europe could supply more gas as it grapples with a record-breaking rise in gas prices that has threatened economic recovery from the pandemic.
Russia is alleged to have withheld supplies to help accelerate the start of the Nord Stream 2 pipeline, which will bypass Ukraine to deliver gas directly to Germany via the Baltic Sea.
Putin last week denied making any policy to Europe’s gas supply, insisting that Gazprom has already exceeded its contractual obligations to customers in the bloc.
Allegations that Gazprom is using energy as a “weapon” to expedite the approval of Nord Stream 2 are “politically motivated talk,” he said, but acknowledged that approving the new pipeline could alleviate energy shortages in the EU.
Continental Europe sources more than a third of its total gas supplies from Gazprom, but a long winter 2020-21 has depleted storage facilities in both Russia and the EU to low levels.
Russia’s Deputy Energy Minister Evgeny Grabchak said last week that Gazprom would be closed by Jan.
At the same time, rising demand for liquefied natural gas in Asia has intensified global competition for LNG cargoes, making it more difficult and expensive for the UK and EU countries to make up for Russia’s reluctance to fill the gap. The UK imported nearly 20 percent of its gas through LNG deliveries in 2019.