Bloomberg News

Austria Leads European Gas-Price Surge as Russian Supply Drops

February 06, 2012

Feb. 3 (Bloomberg) -- Austrian natural gas jumped by more than a third this week as Russian flows declined and freezing weather left about 250 people dead across Eastern Europe.

Gas for delivery Monday at Austria’s Central European Gas Hub in Baumgarten leapt 39 percent, while German prices gained 33 percent. The country yesterday reported a 30 percent drop in flows from Russia, which supplies a quarter of Europe’s gas. Poland, Slovakia, Bulgaria, Romania, Greece and Italy have also been affected. The death toll in Eastern Europe climbed as a Siberian freeze and heavy snowfall struck the region.

“The EU gas market overall is quite resilient to supply shocks coming from Russia,” said Marco Boeri, an analyst at BNP Paribas SA in Paris. “The most important consuming countries in continental Europe can resist between 35 and 55 winter days without Russian flows, provided that an adequate volume of gas is available in their underground storage facilities.”

Gas for delivery on Feb. 6 at Baumgarten jumped as much as 9.20 euros ($12.10) to 32.50 euros a megawatt-hour, and was at 30.50 euros at 3:54 p.m. London time, according to broker prices on Bloomberg. Day-ahead gas at Net Connect Germany was 7.10 euros higher at 30.75 euros a megawatt-hour, taking this week’s increase to 33 percent. Dutch gas at the Title Transfer Facility climbed 14 percent to 30.40 euros per megawatt hour.

‘Maximum Possible’

Europe imports 80 percent of its Russian gas via Ukraine, which today blamed its neighbor for cutting shipments. Transits to the European Union are at 415 million cubic meters of gas a day, compared with a maximum level of 490 million cubic meters, RIA Novosti reported, citing Ukrainian Energy and Coal Minister Yuriy Boyko.

Russia cut gas shipments to Ukraine for two weeks in January 2009 after accusing the country of stealing gas amid a price dispute. More than 20 European countries were affected.

There has been a 30 percent drop in Russian gas to Austria, a 24 percent reduction to Italy and an 8 percent decline to Poland, EU Commission spokeswoman Marlene Holzner told reporters in Brussels today. Natural-gas storage facilities across the EU are full and the situation doesn’t qualify as a “state of emergency” because the affected countries have been able to use natural gas from elsewhere, she said.

“The contracts that Russia has apparently allow for a certain flexibility in case they also need the gas, and that’s the situation that Russia’s facing at the moment,” she said.

‘Wishful Thinking’

OAO Gazprom, Russia’s gas-export monopoly, is shipping the “maximum possible” and quadrupled offtake from underground storage during the current cold snap, Alexander Medvedev, the company’s deputy chief executive officer, said yesterday in a statement. The company is meeting its contractual obligations for supplies to Europe, Sergei Komlev, head of pricing at Gazprom’s export division, said today.

“They are asking for more than we are obliged to supply,” he said. “There is a difference between wishful thinking and agreed contractual volumes.”

German natural gas stockpiles were 68 percent full yesterday, down from 71 percent on Jan. 28, according to Gas Infrastructure Europe in Brussels, an industry group representing gas companies. Dutch facilities held 78 percent of capacity, from 82 percent a week earlier.

Polish gas demand rose to a record 70.3 million cubic meters yesterday, Malgorzata Polkowska, a spokeswoman at Gaz- System SA, Poland’s state-owned natural-gas pipeline operator said. Estonia’s electricity consumption rose to a two-year high of 1,545 megawatts today, below an all-time high of 1,587 megawatts recorded in January 2010, according to the website of grid operator Elering website.

Europe has been battling with temperatures as low as minus 50 Celsius (minus 58 Fahrenheit) in parts of Kazakhstan, the lowest on record, and minus 30.2 degrees in the Russian city of Smolensk, 392 kilometers (244 miles) west of Moscow. In Serbia, 16 towns have declared emergency after being under snow since Jan. 10, said Goran Nikolic, head of the emergency situations division at the Interior Ministry.

--Editors: Rob Verdonck, Alessandro Vitelli

-0- Feb/03/2012 15:40 GMT

-0- Feb/03/2012 15:54 GMT

To contact the reporter on this story: Matthew Brown in London at mbrown42@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net -0- Feb/03/2012 14:55 GMT


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