Russia cuts off natural gas supply!
On November 16th local time, Austrian oil and gas company announced that Gazprom had stopped supplying natural gas to Austria at 6:00 am that day. According to reports, Gazprom's suspension of gas supply to Austria may be related to the deterioration of the contractual relationship between the two parties.
In the past two weeks, natural gas prices in Europe have risen significantly due to increased demand and concerns about disruptions in Russian natural gas supply. Among them, the European natural gas trading benchmark Dutch TTF natural gas futures rose over 8% last week and nearly 9% this week (November 11-15), setting a new high since November 2023.
Russia implements' gas cut-off '
Austrian Oil and Gas Company (OMV) announced on the 16th that Gazprom, the Russian natural gas company, had stopped supplying natural gas to Austria at 6:00 am on the same day.
Previously, the Austrian oil and gas company announced that "OMV Natural Gas Marketing and Trading Company (OGMT) has just received information that Gazprom will suspend the supply of natural gas to Austria under the contract from 6:00 Central European Time on November 16, 2024, in order to reduce the supply to zero
On November 15th local time, Austrian Chancellor Nehammer stated that Austria is prepared for this. Austrian Chancellor Nehammer said, "Our gas storage facilities currently have a storage rate of 93%. In our storage facilities, we currently have 94.5 terawatt hours of natural gas, which means billions of cubic meters of natural gas that can supply the entire Austria for over a year
It is reported that for a long time, most of Austria's natural gas imports have come from Russia. The Austrian Minister of Energy stated that in December last year, this proportion reached as high as 98%. In August of this year, Austria still imported 82% of its natural gas from Russia. However, Nehammer stated that Austria has a safe supply of alternative fuels and will not be affected this winter.
Why was the supply suddenly cut off?
According to reports, Gazprom's suspension of gas supply to Austria may be related to the deterioration of the contractual relationship between the two parties.
On November 13th, Austrian oil and gas company stated that due to the arbitration case against Gazprom, the company's production in Austria is at risk of stopping before the end of the year.
Austrian oil and gas company stated that it has received over 230 million euros (approximately 1.75 billion yuan) in arbitration awards from the International Chamber of Commerce (ICC) due to Gazprom's cessation of natural gas supply to its German subsidiary in September 2022. Austrian Oil and Gas Group has stated that if Gazprom refuses to comply with the ruling, it will have to deduct payment from the Austrian natural gas supply contract it signed to offset the claim.
Austrian Oil and Gas Group stated that "although the arbitration award is related to the supply of natural gas to its German subsidiary in Austria, if Gazprom does not pay the court's ruling, the company will have to offset the claim based on the invoice (via the Ukrainian transit route) in the Austrian natural gas supply contract signed with Gazprom for compensation
According to a previous report by the German newspaper Munich Courier, the European Commission has once again urged EU countries to stop using Russian natural gas that passes through Ukraine. The European Union is ready not to rely on the remaining transit of Russian natural gas through Ukraine, "said EU member in charge of energy, Carrie Simson, in Brussels. She said that the EU has been preparing for months to stop deliveries and has found alternative routes, so Russian natural gas does not need to continue to be transported through Ukraine to Europe.
According to reports, the European Commission has stated that the natural gas stored in the EU is sufficient for winter: the EU had originally planned to have natural gas storage facilities reach 90% of their storage capacity by November 1st, and this goal was achieved on August 19th.
European Commission President von der Leyen said on November 8 that the EU might consider replacing Russian supply with US LNG. Von der Leyen said that the EU still imports a large amount of LNG from Russia. "Why don't we replace it with American LNG at a lower price? This will lower our energy price". She stated that this approach is a trade strategy that the European Union may adopt after Trump takes office as the President of the United States again in January next year.
Since the outbreak of the Russia-Ukraine conflict, Europe has followed the United States in imposing embargoes or price restrictions on Russian oil products and natural gas, leading to a sharp rise in energy prices, which remains high today. In October this year, Hungarian Prime Minister Orban pointed out in his speech at the European Parliament in Strasbourg, France that the slowdown of EU economic growth and high energy prices were largely due to the EU's abandonment of Russian fossil fuels.
European natural gas futures prices rise
It is worth noting that in the past two weeks, natural gas prices in Europe have surged significantly due to strong demand and supply concerns. Last week, the European natural gas trading benchmark Dutch TTF natural gas futures rose more than 8%. This week (November 11-15), Dutch TTF natural gas futures rose nearly 9% and hit a new high since November 2023 on Thursday.
ANZ research firm stated that with the arrival of the heating season, supply pressure is increasing, and the threat of potential supply reduction is also looming. The company's analysts stated that the natural gas consumption rate of EU facilities has reached its highest level in over five years.
CITIC Securities Futures pointed out that the heating season in Europe has already begun, with weather and household demand being the main trading themes. Last week, the cooling process continued, and household demand steadily increased. TTF has been repaired due to a pullback caused by an unexpected cooling process in the early stage. Although the overall cooling process is slightly lower than predicted before the start of winter, there is no further evidence to suggest that this year will usher in a warmer winter than 2023. Coupled with the end of the year gas supply cut from Ukraine and Russia, European natural gas inventories will reach a neutral level of 400-500 TWh at the end of the heating season. There is no basis for a significant decline in TTF, but there is also a lack of driving force for an increase.
Of particular concern is the weak seasonal growth of LNG imports in Europe, with a significant amount of supply flowing to Northeast Asia. Based on observations of LNG receiving station inventories in China, Northeast Asia has accumulated a considerable amount of natural gas reserves. If the weather in Northeast Asia continues to be warm, it may put pressure on the global natural gas market. In terms of recent market trends, CITIC Securities Futures stated that the repair strength of TTF is strong, but no new drivers supporting further upward movement of TTF center have been observed from a fundamental perspective. Light positions in the volatile range should be tested for short positions at high prices, with a focus on continuing to monitor weather conditions in Europe.