Gazprom believes that soaring spot gas prices could affect the European economy
ST PETERSBURG, Russia, October 7 (Reuters) – Soaring gas prices in Europe could destabilize the region’s economy and cooperation between producers and consumers could help balance the market, said the branch chief of export of Russian gas producer Gazprom (GAZP.MM) at a forum on Thursday.
Prices have jumped over 800% this year, raising concerns about inflation and fuel poverty this winter. Russia said on Wednesday it was increasing its supplies, relieving the markets. Read more
Russia also warned that Europe’s preference for more flexible cash market transactions over the type of long-term supply contracts favored by Gazprom has made it vulnerable in terms of volumes and prices.
“Currently, the European spot market shows high price volatility and confuses buyers and sellers, (this) carries the risk of destabilizing the entire regional economy,” said Gazprom Export manager Elena Burmistrova.
“The European spot market only reflects the current state of demand and supply, but is not the pricing tool that provides long-term equilibrium.”
Gazprom’s traditional oil-related contracts come with a price lag, staying at a higher price for an extended period after spot oil prices decline, but also at a lower price during times of soaring prices. .
On Thursday, Burmistrova reiterated that Gazprom was fulfilling its obligations under long-term contracts. Read more
“We provide gas in addition to contract requests where we have such a technical possibility,” she said.
Gazprom added a link to spot prices in its long-term contracts a few years ago, after coming under pressure from its larger customers.
In the past, Gazprom has paid billions of dollars in retroactive payments to some of its larger customers to make up for the price difference in its contracts.
“Those who have signed long-term contracts with us are now profiting from their price,” Burmistrova said on Thursday when asked to comment on the surge in spot prices.
On Wednesday, the price of gas at the Dutch TTF hub climbed to 155 euros per megawatt hour (MWh) before falling after Russian President Vladimir Putin’s remarks. It had fallen to 92 euros per MWh Thursday.
Putin said Moscow does not need gas market turmoil, adding that Russia should sell more gas on its St. Petersburg stock exchange, which offers gas to European spot buyers.
On Wednesday, Putin said Russia could increase supply in the spot market provided his plans to properly fill domestic gas storage do not hurt. Gazprom plans to complete filling its home storage by November 1, an executive said.
Some European politicians have criticized Russia for deliberately not supplying enough gas to cool prices – a charge Russia denies by saying its exports are increasing and approaching an all-time high.
Gazprom has just completed its Nord Stream 2 pipeline, a route that would add an additional 55 billion cubic meters of export capacity from Russia to Europe.
The route, which Ukraine, the United States and some other European countries oppose because it would increase Europe’s dependence on Russian gas, awaits the green light from Germany to start exports. Gazprom plans to ship 5.6 billion cubic meters of gas via Nord Stream 2 by the end of the year.
It was not immediately clear whether Nord Stream 2, which Russia says should help calm prices, would bring in new volumes of gas or operate primarily with gas redirected from other routes such as Ukraine.
Reporting by Oksana Kobzeva and Katya Golubkova; edited by Elaine Hardcastle
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