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Gazprom Says EU Gas Gap Narrowing as Cold Keeps Demand High

OAO Gazprom, Russia’s natural-gas export monopoly, said supplies to Europe are more balanced as customers lower fuel requests even as a cold snap claims more lives across the continent.

The gap between requests and supply will probably continue to narrow, an official at Gazprom’s export division said today by phone, asking not to be named in line with corporate policy.

The cold wave from Moscow to London has increased use for the fuel for heating and pushed up prices at hubs by as much as 39 percent last week. Gazprom, Russia’s export monopoly, rejected requests for extra gas from some European buyers as Prime Minister Vladimir Putin ordered it to make domestic supplies a priority in the freezing weather. Europe depends on Gazprom for about a quarter of its gas needs.

Gas supply to the European Union “has become better,” with flows “back to normal” in some states, European Commission spokeswoman Marlene Holzner said in Brussels. Utilities in Italy, Austria, Germany and France say they’re still undersupplied.

Shipments to Europe were cut by 10 percent from contracted volumes “for a few days,” Gazprom Deputy Chief Executive Officer Andrey Kruglov said at a meeting with Putin on Feb. 4, according to a transcript posted on the government’s website.

‘No Emergency’

Some customers sought more gas than needed last week for “psychological reasons” during the cold, given the volumes they have in underground storage, Deputy CEO Alexander Medvedev said today in an interview with RT state television channel, according to a transcript distributed by the company.

There is “no emergency” and member states are using gas from storage or liquefied natural gas, Holzner told reporters today, reiterating comments from last week.

EON AG, Germany’s biggest utility, and OMV AG, central Europe’s biggest energy producer, both said imports from Gazprom are still down about 30 percent today. GDF Suez SA, Europe’s biggest utility by market value, said the shortfall had narrowed to 20 percent from 30 percent.

“EON is well equipped to cope with the present reductions in Gazprom Export’s gas deliveries,” Adrian Schaffranietz, a spokesman for the Essen-based utility said by e-mail today.

Italian gas imports from Russia will probably be 18 percent lower than requested today, according to forecasts by Milan-based Snam Rete Gas SpA, the national pipeline operator. Italy requested 103.4 million cubic meters today and is likely to receive 84.9 million, according to the operator.

Maximum Capacity

Eastern Europe has been worst affected by the cold, with temperatures below minus 20 degrees Celsius (minus 4 Fahrenheit). The European part of Russia should remain 8 to 10 degrees lower than average this week, the Emergency Ministry in Moscow said. At least 64 Russians died and about 1,400 were treated for cold-related injuries last month.

Gazprom is exporting at the maximum capacity possible, the export official said today. Some European customers boosted requests as high as 30 percent in one day last week as they sought to hedge supply risks, the official said. Some may seek to fine Gazprom for undersupply at a later date, he said.

Polish imports are now at requested levels, said Joanna Zakrzewska, a spokeswoman for Polskie Gornictwo Naftowe i Gazownictwo, Poland’s dominant gas company. Gas demand eased yesterday to 71.6 million cubic meters a day from 72.3 million cubic meters on Feb. 3, according to Gaz-System, SA Poland’s state-owned natural gas pipeline operator.

Prices Jump

Gas supplies to Bulgaria were restored to normal on Feb. 3 and the country’s energy ministry reported no cuts in supplies so far today. Deliveries to Turkey have been above contracted volumes, Medvedev told Putin at the Feb. 4 meeting.

Gazprom boosted production about 30 percent to 1.6 billion cubic meters a day, Kruglov said. There were no restrictions in supplies to domestic consumers, he said. The producer last year limited sales to domestic industrial customers to help satisfy increasing demand from households in freezing temperatures.

Day-ahead prices at European hubs last week exceeded an estimated current Gazprom contract price of about $410 per 1,000 cubic meters, Alexander Burgansky, Roman Odarich and Tatyana Kalachova, analysts at Otkritie Capital, said in a research note today. Austrian natural-gas prices jumped by more than a third last week, while rates at the German and Dutch hubs also climbed.

‘Rigid Infrastructure’

“Gas prices went up despite sufficient availability of gas in underground storage, which in our view is clear evidence of the rigidity of gas infrastructure in Europe,” the Otkritie analysts said.

U.K. natural gas for day-ahead delivery rose to its highest in more than five years. Gas for tomorrow surged as much as 19 percent as National Grid Plc forecast demand for the heating fuel will rise 20 percent above the seasonal norm. CustomWeather Inc. forecasts sub-zero temperatures in London through Feb. 14 that may increase demand.

Gazprom, which ties its gas prices to oil and refined products, criticized European spot markets as illiquid and unable to meet demand. Spot prices had been lower than Gazprom’s rates for most of the past two years.

“All the talk about a liquid spot market is, to put it mildly, a significant exaggeration, because the spot market is illiquid,” Medvedev said at the meeting with Putin. “Despite an increase in spot prices, Europe was unable to meet its needs under long-term contracts using the spot market.”

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