The harsh statements of German politicians, coupled with the actual suspension of supplies via the Yamal-Europe pipeline, led to a record soar in exchange prices for gas. Until the end of the year, the cost of gas is unlikely to fall below $ 1.5 thousand per thousand cubic meters, experts say. The main loser from the energy crisis will be Warsaw, which will receive Russian fuel at spot prices throughout 2022. However, Gazprom itself will also be in the red.

Unprecedented rise in prices

On December 21, the exchange price of gas set an absolute record, exceeding the mark of $ 2,150 per thousand cubic meters during trading. However, on the 22nd, fuel quotes on the main European markets won back a sharp rise, dropping in the first half of the day by 12% - to $ 1848 per thousand cubic meters.

At the same time, uncertainty remains on the European energy market. If negative weather forecasts come true, new price records should be expected on the Dutch TTF hub and the London ICE exchange. But one should not expect a significant drop in exchange quotations until the end of 2021, experts say.

What will happen to gas prices

The current energy crisis in the EU has been influenced by a number of factors, among which the most important is still the acute dependence of European stock exchanges on the situation in the Asia-Pacific region. In recent weeks, China, the main gas consumer in the world, has managed to partially cope with the internal fuel shortage due to the increased use of coal, experts say.

According to Aleksey Gromov, Director for Energy at the Institute of Energy and Finance, prices for liquefied natural gas (LNG) in Asia have now gone down, which has led to the return of the first tankers to the European market. However, their arrival at Euro terminals is not expected until early January 2022.

“Until the end of December, the prices of gas futures contracts in Europe are unlikely to fall below $ 1.5 thousand per thousand cubic meters. At the same time, the maximum will not rise above $ 2 thousand.

Winter in the EU came early, as in Russia, which will prevent the Europeans from receiving additional consignments of fuel from Gazprom. All this adds to the nervousness of traders, ”Gromov emphasized.

He also added that the situation is under pressure from the uncertainty regarding the timing of the commissioning of Nord Stream 2. In this regard, only a quick completion of certification now could normalize the stock market crisis.

“Russia along with China this year showed a record increase in natural gas consumption. If Beijing showed an increase of about 40-43 billion cubic meters, then Moscow - more than 25 billion cubic meters. There have never been such numbers before, "Gromov explained.

According to him, this was the reason for Gazprom's refusal to book additional capacities for a month in advance on the Polish and Ukrainian routes, which actually halted transit through the Yamal-Europe pipeline. Despite this, the Russian monopolist still fully fulfills all contractual obligations to European partners, concluded Gromov.

Europeans are scared off by the cost of gas

Against the background of a fuel shortage and increased extraction of gas from underground storage facilities, now almost no European countries are interested in buying additional volumes of fuel. The main supplies of Russian gas to the EU are at much lower prices - $ 600-700 per thousand cubic meters. Pumping in excess of the established rate through the Yamal - Europe pipeline is tied to the spot (exchange prices), experts explain.

According to Igor Yushkov, a leading analyst at the National Energy Security Fund, this was the reason for the shutdown of the Polish section of the Russian gas pipeline. If the exchange price of fuel falls, Gazprom will be able to use additional volumes under the option “one day ahead” or “one week ahead”.

“The situation around Yamal - Europe is not all that bad. Futures for January, of course, affect the real shipment of gas here and now, but in this segment the price tag is not so critical at the moment. On this route, the Europeans pay for gas a little more than $ 1,000 per thousand cubic meters, ”the expert explained.

According to Yushkov, NOVATEK may contribute to normalization in the exchange market. The Russian company has the necessary resources to transport LNG to Europe.

“Initially, the YAMAL-LNG project was focused on the Asian markets. However, only the eastern part of the Northern Sea Route is suitable for the transportation of tankers in this direction. There is now a lot of ice there, because of which flows can be redirected to Europe. This route will take more time, but additional fuel supplies will restrain the exchange rise in prices in the EU, ”the analyst said. In turn, Gromov stressed that the LNG situation could turn sideways for the Europeans. The fact is that as soon as the first tankers arrive at the local terminals, the prices for liquefied gas will really drop, but in the future this will again lead to the fact that the Asian market will again become more attractive for suppliers.

“NOVATEK already had an indicative incident in 2016-17. The first LNG shipment from the Yamal project was resold three times. First, the party had to go to Asia, then to France (demand and price rose sharply there), and as a result, due to cold weather in the USA, it landed in Boston. This is despite the fact that initially LNG was intended for the French company Total, ”Gromov emphasized.

Who will be the main victims

The countries of Eastern and Central Europe, which are traditionally more dependent on Russian fuel supplies, will suffer primarily from the energy crisis. Poland, more than other EU countries, will feel the consequences of record fuel prices, experts say.

According to Yushkov, Warsaw found itself in a very delicate situation related to the current long-term contract with Moscow. In the summer of 2020, Poland obtained from Gazprom the payment of $ 1.5 billion in compensation in connection with the oil anchoring of the agreement (high oil prices spurred the growth of the contractual cost of fuel for Warsaw). After 2022, the Poles will sever energy ties with Moscow, refusing to renew their long-term contract.

“In court, Poland demanded from Gazprom to transfer the current contract from oil to spot pegging. As a result, as soon as they switched to spot prices, prices soared above $ 1,000 per 1,000 cubic meters. The Poles howled at Russia, sending a letter to Gazprom. However, for the next revision of the agreement, Warsaw now needs to return the same $ 1.5 billion to Moscow, ”the expert explained.

After a litigation with the monopoly, Poland threw all its strength into completing the Baltic Pipe, which is designed to pump 10 billion cubic meters of gas annually from Norway. However, Oslo, unlike Moscow, which has reserved Yamal capacities for the needs of the Nord Streams, does not have the necessary resource base to increase gas pumping through the Baltic pipe. As a result, we can say that Warsaw "whipped itself out" by its actions, experts say.

“In Norway, gas production has been declining for many years. Warsaw will need to buy gas from Germany via the Euro Pipe - 2. The Poles have now contracted only 2 billion cubic meters, Warsaw will have to buy the remaining 8 billion at inflated prices, ”Yushkov said.

At the same time, Gazprom itself may be the main victim of the energy crisis in Europe in the medium term. If the situation on the exchange market continues to heat up in the coming months, the monopolist will face a sharp decline in demand on the continent. For this reason, in the coming years, Gazprom needs to focus on the Chinese route, supplies along which may multiply with the commissioning of the Power of Siberia-2 pipeline, experts concluded.

bbabo.Net