European gas prices: no relief in November

Leading up to the weekend, European gas prices had eased into the low $30’s per MMBtu on expectation of supply increases from Russia that could begin to provide greater balance to the market.

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However, those hopes were dashed today when the results of Gazprom’s capacity auction indicated that Russia currently has no intention of increasing supply to Western Europe in November. Traders booked only about 35% of capacity on Russia’s Yamal pipeline in November, similar to October’s depressed levels which were the lowest since 2014 for the season.

It has been speculated that Russia is currently reserving that gas for domestic demand and below-average stockpiles in their own country, but there is also an element of geopolitical pressure on European regulators to approve the newly completed Nord Stream 2 pipeline.

In the wake of today’s news, European prices have spiked as much as 18% (back above $35/MMBtu) and are now more likely to remain elevated as the market waits for winter weather to materialize.

Source: Gelber and Associates