European gas stocks fall below 65%, Gazprom requests 36 mcm for transit via Ukraine

MOSCOW. Feb 17 (Interfax) – Gas stocks in European underground storage facilities have fallen below 65% of capacity. Europe is trying to save gas primarily at the expense of industry, and fairly mild weather is helping. However, the current inventories are by no means the highest ever seen, and have been below the levels of for the same dates in 2020 for a week now. Stocks have fallen to 51.45% in Hungary, to 50.43% in France and to 40.83% in Latvia.

UKRAINIAN TRANSIT

Gas Transmission System Operator of Ukraine, or GTSOU, has accepted a booking from Gazprom today to transport 35.8 million cubic meters of gas through the country, the same as the previous day, data from the GTSOU show.

Capacity was requested only through one of two entry points into Ukraine’s Gas Transmission System, the Sudzha metering station. A request was not accepted through the Sokhranivka 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 35.8 mcm on February 17, with booking via the Sokhranivka metering station declined," Gazprom spokesman Sergei Kupriyanov told reporters.

The 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 Sokhranivka 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

Wind power generation in Europe is still on the low side, providing only 15% of the region’s electricity needs last week, falling to 11% in the first four days of this week, according to WindEurope.

Mild weather has caused gas prices in Europe to fall. The day-ahead contract at the Dutch TTF gas hub in the Netherlands fell 6% in the past day, closing at $567 per thousand cubic meters.

The “Asian premium”, or the spread between gas prices in Asia and LNG prices in Europe, is steady. In Asia, the most expensive futures contract for March on the JKM Platts index is $638 per thousand cubic meters, and futures under the LNG North-West Europe Marker are $580 per thousand cubic meters.

EUROPEAN INVENTORIES

Current inventory levels in Europe’s underground gas storage (UGS) facilities have declined to 64.81%, which is 20 percentage points above the average for the same date over the past five years, according to Gas Infrastructure Europe.

Inventories contracted 0.41 percentage point during the gas day for February 15.

The relatively mild weather in October, November and January, in addition to the continent’s austerity measures, have resulted in the level of reserves in UGS facilities being at an all-time high for this time of year since monitoring began, thereby underpinning the authorities’ confidence in getting through the winter in good shape.

European LNG terminals operated at 62% capacity in January, and have averaged nearly the same in February. The level of LNG reserves in tanks at receiving terminals has been reducing greatly, implying that the inflow of new LNG shipments to the region is falling amid low prices and competition from Asia.

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.

Reserves decreased 2.8 billion cubic meters for the latest reporting week ending February 10, shrinking more than 50% compared with to the previous week.

The current level of inventories is 47%, which is 9 percentage points higher than the average figure for the past five years, according to the U.S. Energy Department’s Energy Information Administration.

Cold weather is forecast in the U.S. for February, which should result in increased energy costs for heating and increased gas consumption. On the other hand, Freeport LNG, the country’s largest LNG plant, is still postponing restart following an accident, and gas remains on the domestic market that has been expected to be exported. There are reports that gas tankers are leaving the terminal, which, it transpired, are taking old stocks accumulated before the accident out of storage tanks.

The EIA currently expects UGS stocks to drop by 60 bcm 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.