UK and European natural gas prices fall after Putin intervention

UK and European natural gas prices fell on Thursday after Russian president Vladimir Putin ordered state-run Gazprom to begin filling storage facilities in the continent from next month.

UK benchmark prices for both November and December delivery were down almost 10 per cent following Putin’s comments late on Wednesday, dropping to about £2 per therm. The European benchmark in the Netherlands declined 6 per cent to about €80 per megawatt hour.

Both benchmarks remain almost five times the level of a year ago, but traders have been waiting for signals that Russia will boost supplies, having restricted top-up sales for much of 2021 while Gazprom has allowed its own storage facilities in Europe to fall to unusually low levels.

Critics have suggested Russia has exacerbated an energy crisis in order to increase pressure on Germany and the EU to speed up the approval of the controversial Nord Stream 2 pipeline.

Russia has denied restricting supplies, but there have been some signs of concern in Moscow over the long-term impact of such high prices on future gas demand.

Line chart of Pence per therm showing UK natural gas prices slip from recent highs

The Financial Times reported this week that Gazprom’s largest storage site in Germany, and one of the biggest on the continent, is less than 10 per cent full ahead of the start of winter. The largest facility in Austria, also controlled by Gazprom, is about 20 per cent full.

Some analysts have said that has increased the perception of tight supplies, leading to fears of shortages heading into a time of the year when demand for power typically rises.

Russia has consistently said it has met all of its long-term contracts with customers.

Putin suggested on Wednesday that Gazprom’s storage facilities in Germany and Austria should be filled once Russia has completed filling its own domestic facilities in early November.

“This should certainly create a favourable situation on the European energy market, or at least a more favourable one,” Putin told Gazprom’s chief executive Alexei Miller in a televised meeting.

But there is still some caution among gas traders and analysts over whether this will lead to an actual increase in supplies. Putin hinted earlier this month that Russia could act to cool runaway prices but so far supplies to western Europe have shown little sign of rising.

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