Heat in Europe began to work in favor of Gazprom – gas prices went up

Heat in Europe began to work in favor of Gazprom – gas prices went up

Western Europe was hit by a forty-degree heat from Africa, which caused a sharp increase in the energy resources and gas prices, used to generate electricity. According to the EEX platform, on August 4, fuel with the day-ahead delivery is already sold at $76 per thousand cubic meters, although a few days ago it was $62. This situation works in favor of gas suppliers that are already tired of record low prices.

The heat came to Spain as early as on July 31. Meteorologists have recorded the highest since 1955 figures in the continental part of the country – about 42 degrees Celsius. The stem of thermometer rose above 40 in Mallorca.

The heat reached London as well, where it was +38 degrees Celsius. Many of the British immediately rushed to the coast, which caused the residents of the resort area to be sounding the alarms because of scores of people on the beaches. Similarly, tens of thousands of residents of the Netherlands went to the North Sea coast because of the heat.

The heat in Italy set at +40 degrees Celsius. According to Sky News, on the street outside the sea, people find the shades and public fountains the best remedy from heat. The heat did not pass over Germany and Belgium, but it hit France harder. The media reports on forest fires raging on the country’s Atlantic coast. Dozens of buildings were destroyed, and about 100 people were forced to leave their homes.

Amid this, the cost of short-term gas supplies in Western Europe rose on all European exchanges. As for the most liquid TTF it increased by $14, to become $76, and on Baumgarten, where Russian gas is supplied, it was up to $97. Two days before, gas with the day-ahead delivery was traded there at $76.

The experts informed that prices are being pushed up by both demand due to the heat and the falling level of gas supplies from Norway, and LNG. They suggest that the market is also affected by the shock from the coronavirus pandemic.

At the same time, European underground storage facilities were 86.28% full as of Sunday, August 2, 2020, which is extremely high figure for this time of year: this is close to the peaks of previous years, which usually marked October. Experts believe that low-priced natural gas reserves in storage facilities will go on keeping prices down on the European gas market.

The rise in gas prices in Europe is more relevant than ever for Gazprom. Although the most supplies are carried out under long-term contracts linked to oil prices, many of the agreements also provide for the market component. As a result, in January-May alone, Gazprom’s exports went down by 23%, to be 73 billion cubic meters, and revenues dropped by 52%, to be $9.7 billion.

The rise in gas prices in Europe is also relevant for Central Asian natural gas producers, in particular Turkmenistan, since Gazprom buys part of the gas in the countries of this region.