© Reuters. FILE PHOTO: A worker climbs a cylinder at a gas compressor station at the Yamal-Europe pipeline near Nesvizh, southwest of Minsk December 29, 2006. REUTERS/Vasily Fedosenko (BELARUS)/File Photo
By Katya Golubkova and Susanna Twidale
MOSCOW/LONDON (Reuters) – European gas prices eased on Thursday, with the benchmark price down 15% from its record highs, while the Yamal pipeline that usually brings Russian gas into Europe through Germany continued to flow in reverse.
This means that for the third day in a row the pipeline is shipping the gas normally used to heat homes and power electricity generation in Europe from Germany back into Poland.
The move has coincided with Russian gas giant Gazprom (MCX:) filling the newly-completed Nord Stream 2 pipeline under the Baltic Sea, which does not pass through Ukraine, in preparation for it to begin supplying gas to Europe some time next year.
European gas prices had hit a record this week, amid rising tensions between Moscow and Western countries over Ukraine, after the Yamal pipeline flow switched direction. Russia said the reversal had no political implications.
Some countries have said the activities are linked, but Russia has repeatedly denied any connection between the Yamal flows and priming Nord Stream 2, which is opposed by Ukraine and the United States and is awaiting a green light from Germany.
The front-month wholesale Dutch gas price, which is the European benchmark, eased to 141 euros per megawatt hour on Thursday, down by almost 15%.
Traders said news of several shipments of liquefied (LNG) cargoes heading to Europe had provided some respite although prices are up more than 600% from the start of 2021.
But Russian brokerage Aton said in a note that significant relief is not expected anytime soon, as gas withdrawals from storage in Europe were at 762 million cubic meters, the highest since the start of the heating season.
“The European natural gas crisis is gaining momentum. Despite the potential relief from the redirection of LNG cargoes from Asia to Europe, we expect European gas prices to stay firm at least during the winter season,” Aton said.
LNG tankers started to divert from Asia to Europe as prices rocketed, with at least ten cargoes heading west.
Gas prices fuel power bills and are adding to already high global inflation, which Russia has said may backfire in its own economy where consumer prices growth has already hit its highest in nearly six years.
The flows at the Mallnow metering point on the German-Polish border were going east at an hourly volume of around 1,180,000 kilowatt hours (kWh/h) on Thursday and were expected to stay at these levels, data from German network operator Gascade showed.
Alexei Miller, head of Russian state gas monopoly Gazprom which supplies a third of European gas needs, said on Thursday that the second leg of the Nord Stream 2 pipeline will be fully filled with gas by year-end, Interfax reported.
Gazprom has been booking extra capacity at auctions for delivery via Ukraine and to Germany via the Yamal route when it sees requests which come in addition to firm contracts. It had not booked capacity for exports via Yamal for Thursday.
Two major German customers said Gazprom was meeting its contractual obligations, without specifying where they were sourcing the fuel.
“We always, in full and on time fulfil our contractual obligations… towards our European clients,” Miller was quoted as saying by Interfax.
Separately, data from Slovak pipeline operator Eustream showed capacity nominations for Thursday’s Russian gas flows from Ukraine to Slovakia via the Velke Kapusany border point were at 722,667 MWh, down from Wednesday’s 898,385 MWh.
That drop was being balanced by higher nominations for flows from the Czech Republic to Slovakia, meaning nominations for flows from Slovakia to the Austrian hub Baumgarten were roughly stable compared with the previous day.