Russian nominations at Velke entry point for Wed drop to 82 mil cu m

London — Russian nominations for the Velke Kapusaniy for Wednesday, the first day of April, stood at 82 million cu m early Tuesday afternoon, down from a daily average of about 100 million cu m transited in March, data from Slovakian TSO Eustream showed.

The figure suggests flows of Russian supplies destined for Europe via the Ukrainian route will decline in April, and potentially in the second quarter, compared with March, contrary to what many market players had predicted in recent months.

The Velke Kapusaniy entry point sits on the border between Ukraine and Slovakia and is the historical entry point for Russian supplies destined for Italy, Austria and countries in Central and Eastern Europe.

The reduction in flows via Velke might be triggered by the decision by Italian oil and gas major Eni to import less Russian gas into Italy, market players told S&P Global Platts.

Eni, which has a long-term supply agreement with Russia's Gazprom, bought large volumes of PSV/TTF month-ahead products in March, suggesting the Italian major had decided to buy back Russian gas it had already sold to its clients.

"Eni has likely chosen to take less Russian gas in April and to meet its take or pay obligations with Gazprom by increasing purchases in the second half of the year," a UK-based gas trader said Tuesday.

"The [drop] in oil prices might have triggered this decision," another UK-based gas trader operating on the Italian PSV gas hub said. "Eni may want to buy less Russian gas now and wait for lower prices towards the end of the year due to lower oil prices."

April 1 nominations for the Tarvisio entry point on Austria-Italy border stood at 72.3 million cu m, according to afternoon figures from Italian gas operator Snam, down from a daily average of 93.7 million cu m in March.

According to a Prague-based gas trader, a big increase in the premium of Austria's CEGH April contract over its Dutch TTF equivalent during the past week was a sign market players feared a reduction of flows via the Velke entry point.

"The CEGH/TTF spread traded at Eur0.450/MWh a week ago and it's trading at Eur0.75/MWh now," the Prague-based trader said. "Now it has been volatile for a while, but the fear, or call it uncertainty, over if or when Velke flows ramp up is still there."

A further widening of the CEGH/TTF spread is likely if Velke flows are very low on Wednesday, he said.

The April CEGH premium over TTF increased to Eur0.95/MWh just before 1500 GMT.