The scheduled maintenance of Russia’s main export pipelines in July could push gas prices in Europe to new heights. Moreover, if Gazprom does not book additional capacity for transit through Ukraine on June 29 – and the monopoly has consistently refused such an option this year – the gas shortage could dramatically slow down the filling of European storage facilities and even for the first time in history lead to net withdrawals from them. in the middle of summer. However, analysts consider the latter scenario unlikely, noting that this requires the coincidence of many factors.
The current gas shortage in Europe has led to the fact that on June 29 market players will hold their breath to watch the results of the auction for additional capacities of the Ukrainian gas transmission system in July. If Gazprom, as in previous months, refuses to book the proposed 64 million cubic meters per day, this will exacerbate the already difficult situation with filling European underground storage facilities (UGS). Thus, gas injection in recent days, according to Gas Infrastructure Europe, is on average 40% below the five-year average. The current inventory level is only 46.2%.
In the most severe scenario, their temporary disposal could force European consumers to switch to net withdrawals from UGS facilities in the middle of summer. Exports from Norway have now also declined due to pipeline maintenance. LNG supplies to Europe in June decreased by almost 20% compared to May – all free volumes of liquefied gas go to Asia, where the Platts JKM index, which reflects the cost of spot consignments for delivery to North-East Asia, exceeded $ 13 per MBTU ($ 465 per 1,000 USD). cubic meters). Spot gas prices in Europe also continue to grow against the backdrop of a shortage of supplies, at TTF they have already reached almost $ 400 per thousand cubic meters.
Andrey Gromadin from SberCIB Investment Research believes that Gazprom will be able to fulfill its obligations under long-term contracts anyway. At the same time, given the repairs and market conditions, Gazprom, in his opinion, should still participate in the Ukrainian auction “if the company already has an increased volume of additional applications from consumers for July.”
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Maria Belova from Vygon Consulting also believes that it is unlikely that it will come to net withdrawals from UGS facilities in mid-July, since this will require not only a planned shutdown of gas pumping along one of the significant gas delivery routes, but also abnormally high temperatures throughout the territory. Europe, which would stimulate gas consumption. The analyst recalls that over the past ten years, at the European level, this has never happened – in the summer period, the volume of injection always exceeded production. The difference between injection and withdrawal at the European level fell below 1000 GWh per day during this period only twice: May 24, 2013 and May 9, 2017. However, at the level of UGS facilities in individual countries, such a situation sometimes arises: for example, for the last two weeks there has been a net withdrawal of gas from UGS facilities in the UK.
Sergei Kapitonov, gas analyst at the Skolkovo Energy Center of Energy Center, notes that they know about preventive maintenance in the market in advance, and in a similar way, suppliers are working out possible options for optimizing supplies. Therefore, it is difficult to imagine that Gazprom would not voluntarily comply with customers’ requests due to repair work on the gas pipeline, he notes. But, on the other hand, he adds, the lack of interest in booking the Ukrainian corridor will inevitably be reflected in the rise in prices, which, in turn, can stimulate the growth of supplies from competitors, primarily Norway and LNG suppliers.