Russian gas exports to Europe drop as Nord Stream 2 nears completion

MOSCOW (Bloomberg) --Natural gas flows from Europe’s biggest supplier slumped after a price rout and with storage sites at above-average levels.

Flows from Russia via the Yamal-Europe pipeline that runs across Belarus and Poland to Mallnow, Germany, slumped to zero Tuesday after a sharp decline since Sunday. Shipments into Baumgarten in Austria, a major European hub for Russian gas, fell by 25% from its 10-day average.

Operators Gascade Gastransport GmbH and Gas Connect Austria GmbH have not notified the market of any currently planned or unplanned works. Gazprom PJSC, the Russian piped-gas exporter, didn’t immediately comment on the drop in supplies.

“Such a significant reduction in gas transit is primarily driven by weak demand in Europe amid warm winter, high levels of gas in underground storage and demand distortion due to Covid-19,” VTB Capital said in a note.

The European gas market has been watching for signs when key producers Russia and Norway will start curbing flows as an unprecedented glut keep on growing. Prices at the Dutch Title Transfer Facility, Europe’s biggest traded market, plunged as low as 3.365 euros a megawatt-hour last week, or $40.7 per 1,000 cubic meters. Those levels indicate that the economics have deteriorated even for low-cost producers such as Gazprom.

“We note that on average Gazprom pays around $47 per 1,000 cubic meters of transit costs for pipelines other than Nord Stream, including via Ukraine, where the company has ship-or-pay obligations,” VTB Capital said.

The impact is already being felt.

Day-ahead gas prices in Germany jumped 24% to 5.10 euros per megawatt-hour, or the most since November 2019. Rates in bigger-traded regions such as Britain and the Netherlands also gained.

According to Gaz-System SA, the operator of the Polish part of Yamal, the pipeline is practically fully booked for June as well as for the third quarter. May deliveries are being carried out in line with volumes booked in daily auctions, spokeswoman Iwona Dominiak said by phone.

European gas storage sites are about 71% full and the expectations have been that inventories may be completely full by July.

Norwegian gas flows to Europe were below the 5-year average for the time of the year over the past two weeks, but are at seasonal norms now.

Qatar, one of the biggest liquefied natural gas suppliers to Europe, has said it will not cut its exports amid the glut despite low prices.