EU gas again rises above $700/1,000 cubic meter despite warm weather, good wind generation; Gazprom requests 35.5 mcm for transit via Ukraine

MOSCOW. Jan 13 (Interfax) – Europe’s spot gas price has risen above $700 per thousand cubic meters again despite the mild weather and strong wind power generation.

Meantime, prices have not yet responded to the expected severe cooling in Europe next week.

Gazprom’s request for pumping Russian gas through Ukraine has not changed markedly from the previous days and months.

UKRAINIAN TRANSIT

Gas Transmission System Operator of Ukraine, or GTSOU, has accepted a booking from Gazprom today to transport 35.5 million cubic meters of gas through the country, data from GTSOU show.

Capacity was requested only through one of two entry points into Ukraine’s Gas Transport System, the Sudzha metering station. A request was not accepted through the Sokhranovka metering station.

"Gazprom is supplying Russian gas for transit through the territory of Ukraine at the volume confirmed by the Ukraine side via the Sudzha metering station at 35.5 mcm on January 13, with booking via the Sokhranovka metering station declined," Gazprom spokesman Sergei Kupriyanov told reporters.

GTSOU has declared a force majeure with respect to acceptance of gas for transit through Sokhranovka, claiming that it cannot control the Novopskov compressor station. The route through Sokhranovka had provided transit of more than 30 mcm of gas per day.

Gazprom believes that there are no grounds for the force majeure or obstacles to continuing operations as before.

EUROPEAN MARKET

Prices on the European market have slipped on the back of warmer-than-expected temperatures ahead of the weekend. The day-ahead contract for today at the Dutch TTF gas hub in the Netherlands has closed at $728 per thousand cubic meters, and the February futures contract was $778 per thousand cubic meters.

In Asia, the most expensive winter futures contract for February on the JKM Platts index remains higher at $955 per thousand cubic meters on the heels of European prices.

Power generation from wind turbines in Europe has averaged 27% this week following an average of 24% last week, according to data from WindEurope.

EUROPEAN INVENTORIES

Current inventory levels in Europe’s underground gas storage (UGS) facilities have declined to 82.33%, which is 18 percentage points above the average for the same date over the past five years, according to Gas Infrastructure Europe (GIE).

Reserves contracted 0.22 percentage point during the gas day for January 11, the highest offtake figure since December 20.

However, Gazprom has also warned that, "The load on UGS facilities in Europe will be higher than in previous years owing to the changed logistics and sources of gas supplies to the European market."

European LNG terminals have been operating at 63% capacity since the beginning of January against an average of 67% in December.

U.S. INVENTORIES

The state of gas in UGS facilities in the United States is of increasing importance for the global market, and the country is actively increasing gas exports, primarily to Europe.

The latest reporting week ending January, 6, 2023, witnessed an increase at a symbolic 300 million cubic meters rather than a decrease against an S&P Global outlook of a reduction of 200 million cubic meters. The reason for these unusual figures has been down to the warm weather and an unexpectedly quick recovery of production after the failure from the cold weather at the end of December

The current level of inventories is around 60%, which is already seven percentage points lower than the average for the past five years, according to the U.S. Energy Department’s Energy Information Administration.

A significant reduction in offtake is expected going forward owing to rising temperatures and restoring production volumes.

The EIA currently expects UGS stocks to drop by 60 billion cubic meters this winter to the average for the last five years. Natural gas volumes in storage facilities should total 40 bcm by the end of March, which would be 8% below the average for five years.