- Russia is holding tight on the European energy market, opting against sending more natural gas to the continent even after President Vladimir Putin said he was ready to boost supplies.
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Gazprom PJSC s exports to its main markets fell for the first two weeks of October to lowest since at least 2014 for the time of year, as domestic demand absorbed most of the production gains. The results of the auction for pipeline capacity in November gave no indication that Russia is planning to increase shipments to Europe.
The cap on supplies remains in place despite Putin s request last week that the country is prepared to discuss any additional steps to stabilize energy markets. Soaring energy prices are already prompting companies from chemicals giant BASF SE to fertilizer producers Yara International ASA and CF Industries Holdings Inc. to cut output. Extra Russian gas is viewed as the only way to avoid an even deeper supply crunch in the middle of winter.
Europe isn't the only region suffering from the energy crunch. In September, China s commodities output slumped as power rationing and carbon controls reduced operations from metals smelters to oil refiners.
In a series of auctions on Monday, Gazprom opted not to reserve space extra gas on key transit routes through Ukraine next month. It didn't book any of the 9.8 million cubic meters of pipeline capacity offered at Sudzha, and none of the 5.2 million cubic meters of space available at Sokhranovka -both points along the border between Russia and Ukraine.
It will continue to send limited volumes via Germany to Poland. Traders booked only 35% of the gas capacity offered at the Mallnow compressor station for November, where Russia's Yamal-Europe pipeline ends. That is similar to levels in the past month.
While Gazprom has an option to book capacity on a daily basis in November, it hasn t yet done so this month. Russia has repeatedly stated that it needs to fill domestic storage facilities before boosting exports.
Separately, the company published preliminary operational data showing it exported an average of 427 million cubic meters of gas a day so far this month to its key markets which include Europe, Turkey and China. The daily volumes were some 12% lower than the average of last month according to Bloomberg calculations based on the figures.
Gazprom continues to boost its total gas production to feed higher domestic demand with production the average 1.42 Billion cubic meters a day in October. That is up nearly 5% as compared to the same period last year, and 4% higher than the average in September according to Bloomberg calculations.
Dutch gas futures on the European Title Transfer Facility hub jumped as much as 15% after dropping 8.3% on Friday.
Europe is beginning the heating season with the lowest gas inventory of over a decade, stoking concerns about reliability of winter supplies. Storage sites switched to mild withdrawals last week, but mild temperatures this week are giving some respite, with stockpiles edging higher again.
Disappointing results from the Yamal pipeline auction would likely require Russian gas prices to increase high enough to generate enough demand destruction to compensate for lower American pipeline flows, Goldman Sachs Group Inc. analysts said in a report before the event.
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