Putin intervention arrests natural gas surge
UK and European natural gas futures reach new highs, Russian announcement leads to a cooling
The energy supply crunch engulfing Europe continued on Wednesday, sending natural gas prices in Europe and the United Kingdom to new all-time highs.
UK natural gas prices have risen by more than 500% since the start of 2021, far surpassing the previous 120 pence a therm record reached in 2018.
Ticking up further, UK gas futures for November delivery rose by as much as 40% on Wednesday, briefly breaking the 400 pence a therm barrier. Meanwhile, November gas at the Dutch TTF hub – a European benchmark – briefly rose by more than €30 to a new high of €155.00 per megawatt hour.
Russian president Vladimir Putin arrested the morning’s runaway momentum by announcing a long-awaited increase in Russian gas exports to Europe via Ukraine.
Throughout 2021 increased demand from Asia, and in particular from China, has made Russian natural gas more expensive for the European nations who depend upon it.
As supply anxieties mounted in recent weeks, European nations such as Ukraine have called on Russia to step up exports, while the International Energy Agency outlined its belief that “Russia could do more to increase gas availability to Europe and ensure storage is filled to adequate levels in preparation for the coming winter heating season.”
Nord Stream 2
Much of the recent tension has revolved around Nord Stream 2, a natural gas pipeline between Russia and Germany which bypasses a number of European nations via the Baltic sea. Having been delayed by a slew of sanctions and obstacles, the project could come online by the end of 2021 at the earliest.
Speaking with Russian energy officials in a televised meeting on Wednesday, President Putin said that Europe was to blame for the current crisis, stating: “They’ve made mistakes.”
Attributing the crunch in part to what he saw as a shift from long-term contracts towards the spot market, the Russian leader added: “It turned out, and today this is absolutely obvious, that this policy is wrong.”
Putin further maintained that Gazprom had never refused to increase supplies to customers, as had been alleged in recent weeks, and added that supplies from the state-backed energy giant to Europe could reach a new record.
Following the intervention, UK natural gas futures cooled to 277 pence a therm, while Dutch TTF futures fell to €113.50 per megawatt hour.