Russia resumes gas flows to Europe, prices fall and fears subside

Wholesale gas prices fell in Europe on Tuesday after flows from Russia to Germany resumed, raising hopes that Moscow is acting on a pledge to increase supply and ease fears about shortages and high prices. as winter approaches.

Russia began pumping gas to Germany again late Monday through the Yamal pipeline, a day after an export disruption had pushed prices up in Europe. Gas flows then rose to their highest level in nearly two weeks, German data showed.

The Russian President, Vladimir Putin, ordered the state gas company Gazprom to increase supplies to Europe and rebuild its inventories there once the domestic storage tanks are replenished.

In a sign that it is beginning to comply with that order, Gazprom said Tuesday that it had started pumping gas to five European underground warehouses by November.

Russia provides a third of the gas of Europe and its supply intentions are critical at a time when a surge in spot prices has hit both households and businesses in Europe, underscoring the continent’s heavy dependence on Moscow for its energy supply.

Although wholesale prices in European Union countries and Britain fell, analysts say a further drop in values ​​would depend on Russia doing more to ease European concerns and how cold it is next winter.

“So until those concerns go away, prices will stay high,” said Trevor Sikorski, an analyst at consultancy Energy Aspects.

Dmitry Marinchenko, a senior director at rating agency Fitch, said Gazprom would need to pump around 170 million more cubic meters of gas each day for a month, an increase of about a third of what it is sending now, to recharge its reserves. European.

“For such a serious increase in supplies, Gazprom would have to reserve additional transit capacity through Ukraine; the Nord Stream 1 and Yamal-Europe (pipelines) would not be enough, ”Marinchenko said.

Russia has denied that it is withholding supplies to Europe to pressure German regulators to approve shipments via the new Nord Stream 2 pipeline below the Baltic Sea. Germany has until the beginning of January to certify the pipeline.

Gas prices have risen this year due to factors including low inventories and higher demand following the economic recovery since the easing of blockages in COVID-19as well as scarcer-than-usual supplies from Russia.