Gas price is growing on the European futures market

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Moscow FM on the factors affecting gas prices in Europe.

“The bulk of natural gas, apart from Gazprom’s supplies, goes to Asian markets, where gas demand is also high, where gas prices are still higher than in Europe. This pushes prices up. An abnormally cold winter last year, given the record decline in demand due to lockdowns caused by the pandemic, - Europe practically did not buy gas on foreign markets. This year we see a recovery in demand. Now Europe does not have time to fill its gas storage facilities ahead of the autumn-winter heating season, so the demand for gas in Europe is increased, because Europe is trying to fill them as quickly as possible. Now they are only 70% full. If the winter is warm, then this reserve will be enough, but if the winter is the same as last year, then Europe will have big problems,” Alexey Gromov believes.

In October, Gazprom is to launch the Nord Stream 2 pipeline. A united pipe from Russia to Germany was built along the bottom of the Baltic Sea for the purpose of direct gas supplies to Europe, bypassing transit countries, in particular, Ukraine, Belarus and Poland. The pipeline's throughput capacity is 55 billion cubic meters per year.

After its launch, prices are likely to decline, Alexei Gromov says.

“This is a significant increase in additional gas for the European market. At the moment, this should at least stop the rise in prices, and in the future, stabilize and even lower it by several hundred dollars. Whether it will be launched in October is a matter of principle. The German regulator said it could take up to four months to review the pipeline certification documents. This means that potentially Nord Stream 2 can be launched only by the end of the year,” Gromov sums up.