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Russian President Vladimir Putin said Moscow was ready to work towards stabilizing the global energy market, causing a sudden reversal in natural gas prices, which had previously reached their highest level on record.
The Russian leader appeared to show his geopolitical muscles by signaling that he could help alleviate a growing crisis in Europe caused by a shortage of natural gas, a key energy source for generating electricity and heating homes. High prices in Europe have also spilled over into the United States, with natural gas trading at its highest level in more than a decade.
Mr Putin said on Wednesday that Moscow is a reliable supplier that still fulfills all of its obligations. “We can achieve a new record of deliveries of our energy resources to Europe, including gas” this year, he said.
Russian gas flows to Europe have been the subject of intense debate among energy traders and officials in recent months, and will play a key role in determining whether prices remain at economically punitive levels.
Some officials, traders and analysts have said that Russian energy giant Gazprom PJSC has been slow to ramp up gas shipments even as Western European countries struggle to rebuild their stocks. Natural gas levels, which rose during the pandemic economic downturn, are now well below normal levels as the winter months approach.
The price hike is interpreted in European capitals as an attempt to pressure officials and regulators to approve Nord Stream 2, a controversial pipeline connecting Russia and Germany that is about to be launched . The Kremlin has repeatedly stated that Russia is fulfilling its contractual obligations.
Dutch gas futures rose 40% in morning trading to € 162.13 per megawatt hour. This was by far the highest level on FactSet data dating back to 2013 and equivalent to $ 187.11 per megawatt hour.
Prices then soared after President Putin said Russian gas deliveries to Europe are expected to hit a record high this year. Mr Putin blamed Europe for historically high gas prices and said the amount of gas flowing through Ukraine is expected to exceed the volumes agreed under state energy giant Gazprom’s contract with Kiev .
Gas futures slid over € 50 after Mr Putin’s comments to trade down 9.5% that day to € 105.00 per megawatt hour. Even after the pullback, European gas prices remained more than twice as high as a month ago and more than quintupled this year.
The wild trade before and after Mr Putin’s comments is a testament to the tensions felt in the markets. Traders and analysts said the peak in Europe on Wednesday morning was likely caused by a trader or utility closing a deficit short position rather than the prospect of a winter shortage.
Two factors could push down European gas prices, traders say: an extended period of mild weather that saps demand, or an increase in gas flows from Russia.
A large part of Russian gas exports to Europe pass through Ukraine, but this is expected to change after the Nord Stream 2 pipeline comes online, possibly in the coming months if the pipeline receives approval from European authorities. . An adviser to the European Court of Justice helped pave the way for the opening on Wednesday, saying Nord Stream 2 AG, the Gazprom unit that built the pipe, is in a position to challenge rules stating that producers cannot cannot control the pipelines that deliver their fuel.
A Russian film crew was launched on Tuesday to the International Space Station to make the world’s first film in orbit. The Russian space agency is getting ahead of NASA, which announced last year that it would work with Tom Cruise to film aboard the spacecraft. Photo: AFP / Getty Images
The launch of Nord Stream 2 would allow Moscow to export directly to Germany and bypass Ukraine and Poland, whose governments criticize the Kremlin.
The United States is concerned that Russia is using Nord Stream 2 to exert influence over Europe and punish pro-Western Ukraine. But the Biden administration lifted sanctions on the project in May as it sought to improve relations with Germany. Russia and Germany say Nord Stream 2 is a commercial project, offering a shorter and cheaper route for gas supply.
“And we can say with confidence that we will exceed our contractual obligations for the supply of gas through the territory of Ukraine,” Putin said, while suggesting that the increases would be limited. “The increase in volume is economically uneconomic for Gazprom because it is more expensive.”
Soaring prices have negatively impacted energy-intensive industrial activity in Europe, prompting fertilizer factories to cut production in the UK and elsewhere. Several small energy providers in Britain have gone bankrupt after failing to protect themselves against soaring wholesale market prices. Consumers are expected to face a sharp increase in their energy bills in the coming months.
Write to Georgi Kantchev at [email protected] and Joe Wallace at [email protected]
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