London — Russian gas continues to flow to Europe and Turkey at all-time highlevels in 2017 following record-breaking volumes last year, as cold weatheracross Europe -- especially in the east -- triggers increased demand forGazprom gas.
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Russian gas prices also remain competitive compared with European hubs --the oil price rally of end-2016 will only filter through to oil-indexed gascontracts in the coming months -- so European buyers are thought to be maxingout their Russian gas purchases.
In a statement Monday, Gazprom said gas flows to what it calls the FarAbroad -- Europe and Turkey but not the ex-Soviet states -- hit a new dailyrecord of 621.8 million cu m on Sunday.
That is the highest ever daily flow of Russian gas to Europe and Turkey,and came on a weekend day, when European consumption is normally lower,Gazprom said.
Gazprom's daily supplies to Europe and Turkey first broke a nearnine-year record in mid-October and then repeatedly topped that markthroughout the winter.
Exports hit a total of 179.3 Bcm in 2016, a significant jump on itsprevious highest level of 161.5 Bcm from 2013 and well above the 2015 total of158.6 Bcm.
"The record result demonstrates the significant increase in demand forRussian gas in Europe and our ability to ensure that it exports are robust tothe required extent," CEO Alexei Miller said Monday in a separate statement.
He said that Gazprom produced 419 Bcm in 2016 and that the company had anadditional spare production capacity of 150 Bcm.
"This allows us to quickly increase the supply of gas within the countryand abroad during the winter peak consumption," Miller said.
Russian gas flows via the Nord Stream pipeline to Europe continue to runat maximum capacity, with flows to Germany at 161 million cu m on Sunday.
Of that, 76 million cu m was delivered into the OPAL pipeline to theCzech Republic, up on the average 44 million cu m/d in 2016 before Gazprom wasgranted additional capacity in OPAL in October by the European Commission.
Flows into OPAL continue at these higher levels despite uncertainty overthe legality of the European Commission decision to allow Gazprom to use morecapacity in OPAL after an appeal by Poland's PGNiG.
The increased flows through Nord Stream come at the expense of exports ofRussian gas via Ukraine, which have fallen by the same amount sincemid-December.
That implies volumes are simply being diverted to the Nord Stream routeaway from the Ukraine route, the former being a cheaper route to market forEuropean buyers.
European buyers have an incentive to continue to buy maximum volumes ofRussian gas through January, February and into March as the oil price rallytakes time to work through to the oil-indexed gas contract price.
From Q2, however, Russian gas flows may fall as European hubs becomeincreasingly competitive, according to the current forward curve.
The top of the range blows out to Eur20-22/MWh in June-December thisyear, well above the corresponding TTF month-ahead price of Eur17-18/MWh inthe period, according to Platts Analytics' Eclipse Energy data.
--Stuart Elliott, firstname.lastname@example.org
--Edited by James Leech, email@example.com