Analyst does not rule out further gas price growth in Europe

Gas prices in Europe may continue to rise on the gas exchange, according to Igor Yushkov, a leading analyst at the National Energy Security Fund and an expert at the Financial University under the Government of the Russian Federation. He told Izvestia on December 3, specifying that this will be affected by the weather and the situation with Russian supplies of the energy resource.

In November, the average exchange price of gas in Europe exceeded $490 per 1,000 cubic meters. This became the maximum for the year, the RIA Novosti news agency reported citing data from the London-based ICE exchange.

Yushkov noted that a rather large jump in the cost was observed back in August, after which the price on the European spot market did not fall below $400 per 1 thousand cubic meters. At the same time, the indicators are affected by the risks of termination of transit of the Russian energy resource through Ukraine, as the Ukrainian side previously reported that it does not plan to extend the transit agreement. In addition, in late November, prices on the European market rose significantly amid the introduction of U.S. sanctions against Gazprombank, through which EU companies pay for supplies.

At the same time, the analyst named the cooling in European countries as a fundamental factor. He recalled that the heating season began in November, the states have moved to the withdrawal of gas from underground storage facilities, which is happening quite intensively.

"For two weeks of the heating season, Europeans have used up almost 10% of the stock of underground storage facilities. They entered the heating season with indicators of about 96% fullness, and after two weeks it was 87% fullness. They started to "eat" gas from underground storages quite intensively. This also makes the market nervous and pushes prices up, so they are kept at a relatively high level - somewhere around $500 per 1 thousand cubic meters. They reached $520-525, then they rolled back a bit, but the weather also affects it," the expert explained.

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In his opinion, further price increases are likely. If the countries have lower temperatures, they will consume more gas every day, significantly use the energy resource from underground storage facilities, which will create some tension in the market.

"Transit through Ukraine: the question remains relevant, will there be it or not from January 1? Also under question are supplies to the European Union in general: what to do with sanctions against Gazprombank, whether the U.S. will give exemptions from sanctions or not, whether Russia will meet the Europeans and allow some other bank to be used for settlements? "These are all still pressing issues, and there are about two weeks left before the deadline to finalize all transactions with Gazprombank, so the intrigue will increase, and I think the price [in Europe] will also be higher," Yushkov specified.

According to him, about 25 billion cubic meters of gas in annual terms are currently supplied from Russia to the EU countries - these are significant volumes. And if supplies stop at the height of the heating season, it will be sensitive for the European market, and the price will rise.

Earlier, on October 10, Gazprom CEO Alexei Miller said at the plenary session of the St. Petersburg International Gas Forum that Europe's policy on the gas market may lead to a new gas price shock and supply disruptions. He called the situation on the European gas market bad and agreed with the assessment that the demand for energy resources there is being destroyed purposefully.