Europe On Edge After Russia Unexpectedly Halts Gas Shipments Via Yamal Pipeline
In the middle of last week, an increasingly cold Europe exhaled a collective breath of relief when Russian president Vladimir Putin told Gazprom CEO Alexey Miller to “start gradual and planned work to raise gas volumes in your inventories in Europe: in Austria and Germany.” While markets were focused on the (latest) promise by the Kremlin to boost output to Europe, we said that this was just another chapter in Russia’s “cat and mouse” game with a soon to be freezing Europe, that the key word here was “gradual”, and that anyone expecting a sudden surge in Russian nat gas shipments to Europe should not hold their breath as “Putin has been very clear in laying out Russia’s ask to save Europe: activate the Nord Stream 2 pipeline. As long as Europe’s bureaucrats refuse to comply, any hope that electricity costs will slide in the coming weeks will be at best – pardon the pun – a pipe dream.“
We didn’t have long to wait to be once again proven right: on Saturday, Russian gas supplies through the Yamal – Europe pipeline via Poland to Germany had come to a sudden, unexpected, and screeching halt.
While this was merely the latest political move in the escalating game over Europe’s energy future, with Putin making it very clear who has all the leverage, Gazprom was quick to deny what is patently obvious, and said that European customers’ natural gas requirements were being met as Russia sends gas to western Europe by several different routes, besides the the Yamal – Europe pipeline, which has an annual capacity of up to 33 billion cubic metres.
“There is no demand for gas transit towards Germany currently,” a Gaz-System spokesperson said in an e-mailed statement.
Needless to say, that’s not how Europe, or European gas traders will see it after Germany’s Gascade operator said that flows at the Mallnow metering point in Germany, which lies at the Polish border, stopped early on Saturday.
And so the political game over the Nord Stream 2 pipeline ratchets up, with Europe likely to see even less gas despite Gazprom saying that the requests of customers in Europe were being met and that fluctuations in demand for Russian gas were dependent on the actual needs of buyer (spoiler alert: European buyers need much more than 0).
While no gas reached Germany on Saturday, a spokesman for Poland’s state-controlled PGNiG said flows from the east were much lower than usual, but Poland was still receiving amounts consistent with its contract. Poland’s gas grid operator Gaz-System said on Saturday the Yamal pipeline was delivering gas to Poland via the Kondratki compressor station on the east and Mallnow on the west through “reverse mode” – meaning it was shipping gas from west to east.
One Russian news media report suggested the flow reversal was a short-term problem caused by balmy weather in Germany over the weekend.
Russian gas export flows have been closely watched as gas prices in Europe have soared amid economic recovery and low inventories. This website was one of the first to anticipate the endgame, writing on August 3 “From Russia With 50% Less Supply: European Nat Gas Prices Explode To Record Highs As Putin Turns The Screws.“
Gazprom has been accused by the International Energy Agency and some European lawmakers of not doing enough to increase its natural gas supplies to Europe, but the Russian company has said it has been meeting its contractual obligations. A gas transit deal between Russia and Poland expired last year, but Gazprom can book the transit capacity via the pipeline at auctions.
Adding insult to injury, at the last auction on Oct. 18, Gazprom booked some 32 million cubic metres per day, or 35% of total additional capacity offered by the Polish operator Gas System for transit via the Kondratki transit point for November. The news of the far lower booking sent European gas prices surging, although last week’s Putin statement eased concerns modestly. Should flows via Yamal not restore, expect to see new all time highs in European gas prices in the coming days.
Meanwhile, we fail to see why there still remains confusion as to what happens next: On Oct 19, Putin made it explicitly clear what so many had though, signaling that no extra gas would flow to Europe without Nord Stream 2. And yet, even though Russia has all the leverage, Europe continues to delay final certification of the critical NS2 pipeline.
Finally, Russia’s choice to halt gas supplies to Europe comes around the time Joe Biden warned Vladimir Putin not to weaponize natural resources for political purposes, confirms just how much influence
Brandon Biden has on the world arena.
Sun, 10/31/2021 – 20:35
via ZeroHedge News https://ift.tt/3bsKsjr Tyler Durden