European Natural Gas Prices Slide on Increased Russian Supplies

By Will Horner and Joe Wallace

European natural gas prices tumbled for a second day on signs Russia was making good on its promise to increase exports to the region, alleviating concerns about tight supplies ahead of winter.

Dutch natural gas futures, the European benchmark, fell over 11% Wednesday to EUR64.14 a megawatt-hour. The decline added to a 12% fall that came Tuesday after data suggested Russian deliveries were picking up.

European gas prices have surged in recent months due to low inventory levels and rebounding demand as the continent's economies recover from the coronavirus-driven slowdown. Analysts and European officials have said low supplies from Russia, which accounts for almost half of Europe's gas imports, are contributing to the surge.

Russia's state energy company Gazprom PJSC last month said it would send more gas to its own storage sites in Western Europe from early November to help stabilize the gas market. Since then, prices have whipsawed in response to changes in gas flows along major pipelines.

There are currently tentative signs Russia is sending more gas. More than 94 million cubic meters of natural gas are expected to flow through a key checkpoint in Europe's pipeline network on Slovakia's border with Ukraine Wednesday. That would mark an increase from roughly 85 million cubic meters on Tuesday and 75 million cubic meters on Monday, according to data from EUStream, which operates Slovakia's gas transmission system.

More gas has flowed through Mallnow, a compressor station on Germany's border with Poland that connects to Gazprom's Yamal-Europe pipeline, in recent days, according to German gas transportation company Gascade Gastransport.

"The resumption of Russian gas flows to Germany at Mallnow and small injections into German storage at Rehden have calmed traders' nerves and prices," said Emily McClain, senior gas market analyst at Rystad Energy, in a note to clients.

Still, forecasts of below-average temperatures in northwest Europe in coming weeks risked sending prices higher again if the additional Russian supplies don't hold, she said.

European gas futures soared to a record high of over EUR160 a megawatt-hour early last month from a low of about EUR15 in March. Prices have since eased but remain more than four times as high as they were a year ago.

Some European officials have said Russia is withholding supplies to pressure regulators to approve its Nord Stream 2 pipeline to Germany, which runs via the Baltic Sea and circumvents U.S. allies including Ukraine. Russia denies it is trying to pressure regulators and Gazprom has said it is meeting its contractual obligations.

A potential rise in output in the Netherlands has also weighed on prices. Dutch economy and climate minister Stef Blok said Tuesday that the gas field at Groningen, which is being wound down after a series of earthquakes, could produce more gas than expected this year and next.

"Things seem to be cooling on natural gas markets specifically and energy markets more broadly," said Norbert Ruecker, head economics at Julius Baer, in a note. "A temporary production increase in the legacy Dutch Groningen field, and news about Russia booking additional pipeline capacities to ship more gas towards Europe hampered sentiment," he said.

Write to Will Horner at [e-mail] and Joe Wallace at [e-mail]

(END) Dow Jones Newswires

11-10-21 0811ET