Gazprom PJSC said in a report to Russian President Vladimir Putin last week that it continues to fulfill all contractual obligations for shipping natural gas to Europe, which has been desperate for the fuel this winter. 

“As usual, Gazprom has been providing reliable gas supplies to our consumers in Russia and abroad,” said Gazprom’s Alexey Miller, chairman of the management committee, in a report  in late December. “We have been fulfilling all of our contractual export obligations under long-term bilateral contracts in accordance with requests.”

Miller said Russia started the withdrawal season with about 2.5 Tcf in storage and a daily deliverability of about 30 Bcf. “Both the working gas reserves and the daily deliverability are at all-time highs for our country,” he added. 

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Miller said by the end of December Russia’s inventories were filled to 83% of capacity. In both November and December, he said Gazprom fulfilled instructions from Putin to move more natural gas into European storage. By the end of December, the company had injected about 35 Bcf into those facilities. The Russian government holds a majority ownership interest in Gazprom. 

European natural gas prices have hit record highs this winter, topping out near $60/MMBtu last month amid unstable deliveries from Russia, competition for LNG cargoes with Asia and a blast of cold weather. Prices have since fallen as more LNG cargoes have made their way to Europe to take advantage of what’s been some of the world’s highest-priced gas. LNG arrivals in Europe are set to hit record levels this week, when deliveries are projected to surpass 105 Bcf. 

In recent days, though, European prices have begun climbing again as warmer forecasts have shifted. Colder weather is expected by mid-month. 

Miller also said Gazprom has fulfilled its obligations under a gas transit deal to move about 1.4 Tcf annually across Ukraine toward Europe through 2024. By the end of 2021, he added that the company had shipped nearly 1.5 Tcf through the country. 

Limited Pipeline Supply

Still, European prices continue to find support on Russian supply concerns. The continent has historically relied on Russia for about a third of its natural gas supplies. 

Russian flows westward into Germany on the Yamal-Europe pipeline were halted for a 17th consecutive day on Thursday, while flows through the Velke Kapusany compressor station on the Ukraine/Slovakia border have also been limited.

“Russia remains in focus on the European gas markets, where reduced flow from the east yesterday caused new price jumps,” trading firm Energi Danmark said in a note Thursday. “Flows from Russia through Ukraine remain low, as the extremely tense situation between the two countries also affects gas transit.”

Russia’s decision to move a limited amount of excess capacity westward has been attributed to colder weather and a lack of customer requests. Miller noted that temperatures dipped below normal across much of Russia’s gas system for part of December. 

The Nord Stream 2 pipeline, which could move 5.3 Bcf/d from Russia to Germany, is also complete but awaiting regulatory approval, raising questions about whether Russia is using current gas deliveries as leverage to get the new system operational. 

The spread between the Asian and European markets has also narrowed considerably since last month. Temperatures have plummeted across parts of Japan and created more demand. Inventories across Asia, however, are well stocked with temperatures expected to stay at or above normal in the coming weeks. This could make it unlikely for buyers in the region to compete for LNG cargoes if European prices surge once more. 

“Overall, the near-term market sentiment indicates limited upside, and we expect that prices may find support in depleted European storage and continued concerns over supplies from Russia,” said Rystad Energy analyst Wei Xiong.

European storage inventories stood at 56% of capacity Thursday, compared to the five-year average for this time of year of 70%.