Natural gas prices for November and December delivery in the U.K. and across Europe fell by about 10 percent after Russian president Vladimir Putin ordered state-owned gas company Gazprom to refill the region’s storage tanks beginning this month as the continent enters its winter season.
Germany’s largest gas reservoir had fallen below 10 percent of capacity prior to Putin’s order, according to the Financial Times.
Putin indicated that Germany’s and Austria’s key gas reserves would be replenished once Russia has topped up its own storage fields, a process that should be completed early this month, the FT reported.
Europe’s benchmark electricity rate declined to about €80 per megawatt-hour on the news.
However, prices of both gas and electricity remain close to five times higher than a year ago.
Europe has no gas reserves and depends on gas from Russia and North Africa to heat its buildings and generate significant portions of its electricity.
The continent had ended last winter without gas in reserve after late-season cold waves depleted gas supplies more than expected, as we reported in “Will Surging Gas Prices Sink U.K., E.U. Economies?” (21 Sep 2021).
Russia had delayed approving new gas deliveries to Europe’s depots; some observers and politicians believed the delay was Russia’s way of demonstrating power over one of Europe’s basic needs and showing the continent what could happen if it becomes an obstacle to Russian interests.
TREND FORECAST: We hold to our forecast made in “High Natural Gas Prices Slow Europe’s Recovery” (14 Sep 2021): high gas prices will reverberate through the continent’s economy, pausing growth through the winter, fueling inflation, and retarding any full economic recovery by at least six months.