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Gazprom threatens to reduce gas flows to Europe via Ukraine
Energy

Gazprom threatens to reduce gas flows to Europe via Ukraine

22.11.2022
The Ukrainian route is the last pipeline still carrying Russian gas to Western Europe as cold weather sets in
Gas prices rose just 2% after the news hit
Gas prices rose just 2% after the news hit
Photo credit: Shutterstock

Gazprom PJSC threatened to cut its gas flows to Europe via Ukraine next week, just as cold winter temperatures prompt Europeans to start tapping their gas stores. 

The Ukraine route is the last remaining pipeline still bringing Russian gas to western Europe as Moscow has progressively squeezed supplies to the continent since before the war. Traders and policy makers have been bracing for flows on that line to be curbed too, and gas prices rose just 2% on the news.

The Russian producer said on Telegram some gas volumes meant for Moldova are being kept in Ukraine. Gazprom warned it will limit transit volumes from November 28 corresponding to the amount of gas not reaching Moldavian customers. The route is also used for further transport to Europe, already at much reduced levels.

The Russian producer, Gazprom, warned it will limit transit volumes
The Russian producer, Gazprom, warned it will limit transit volumes
Shutterstock

There are concerns in Europe that the issue with Moldova may be the beginning of a complete shutdown as disputes over contractual clauses and regulation have been a feature of the meltdown in economic ties between Russia and the west. Even with fuller-than-normal inventories providing some buffer, winter without any Russian gas would be a challenge for Europe. 

Gazprom calculates that so far Ukraine has accumulated 52.52 million cubic meters of gas that was meant for Moldova, it said. If those imbalances remain, Gazprom will begin reducing gas supplies to Ukraine on November 28. Gazprom currently sends around 43 million cubic meters per day to Europe via Ukraine -- the last remaining route to western European markets.

Since October, Gazprom has reduced gas flows to Moldova to 5.7 million cubic meters a day and had pledged to keep them at that level next month as well. Ukraine’s Naftogaz didn’t immediately respond to a request for a comment.

Benchmark futures added as much as 4.2% -- before trimming those gains -- and are almost four times higher than usual for this time of the year. Still, Europe is now in a comfortable position with strong LNG imports and reduced industrial demand amid high prices helping counter months of Russian supply curtailments.  

©2022 Bloomberg L.P.


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