Vladimir Soldatkin, Katya Golubkova

MOSCOW (Reuters). Europe’s largest gas companies say Gazprom (MCX) fulfills its long-term agreements. However, the dispute over whether Gazprom could do more in order to reduce price pressure on a hot spot market remains central to the Russian energy giant.

Gazprom has been placed in Europe’s crosshairs by the rocketing gas price. It is up nearly 600% from this year.

Russian gas pipeline monopoly that supplies 35% European energy needs insists that it meets its contractual commitments – as top European clients confirmed to Reuters.

European politicians are under increasing pressure from winter heating bill hikers to say Russia can supply more. They also use the spike in gas prices as leverage in a dispute about the Gazprom-funded Nord Stream 2 pipeline.

The Italian firm stated in emailed remarks that Eni has received from Gazprom the full quantity of gaz which is nominated under the long-term contract. These comments echo statements by half a dozen leading European energy companies to Reuters.

European Union officials still believe Gazprom is responsible for the rise in gas prices. The company has not offered extra quantities to spot market buyers to meet rising demand, while Norway’s big supplier has.

Ursula von der Leyen, President of the European Commission said Tuesday that while Norway has increased its production we are grateful. However, this is not happening in Russia.

EU Parliamentarians demand that Gazprom be investigated for possible violation of competition rules. The EU parliamentarians want Gazprom to be investigated over possible violations of competition rules.

The United States and several European countries oppose this project. They claim that it will increase dependence on Russian fuel. The plan has been accepted by Germany, but it is possible that a final vote will take place months later.

SPOT MARKET SHIFT

Gazprom does not have a commercial obligation to sell Europe’s spot marketplace. However, it has claimed that it has been meeting its contractual obligations. Europe has previously been warned about Gazprom saying that the spot market is more reliable than long-term contracts. Gazprom declined to comment on this article.

Russian President Vladimir Putin claimed Wednesday that Russia was increasing supplies and acting in a reliable partnership. But he stated that the EU committed an error when it switched to a spot market, according to steps made years ago.

Dmitry Peskov (Kremlin spokesperson) stated: “As far I know Gazprom remains in constant contact to its European customers, and all allowed additional supply requests will be met by Gazprom.”

Gazprom’s ability to increase supplies is still unclear. With its inventories already at historic lows, Russia’s winter requirements looming, and output nearing historical highs, there are few options.

Long-term European contracts do not indicate whether European businesses have requested more fuel. When Reuters asked European energy firms Wingas, Engie and Uniper what they wanted for more gas, Eni and Uniper said they didn’t ask, while OMV, OMV, RWE and Eni did not provide any further information, except to say that Gazprom met its contract commitments.

Gazprom has two sources who said they hadn’t received any spot buyer requests for fuel.

Gazprom data show that Gazprom’s exports to countries outside of the Soviet Union increased 15.3% in nine months, reaching 145.8 Bcm. This includes exports to Europe and Asia where there has been an economic boom that has brought in more gas, most of which is in LNG cargoes.

Nord Stream 2 will increase the annual capacity to 55 bcm.

Gazprom is not racing to supply more Europe’s spot buyers with its existing routes. Gazprom booked just a third transit capacity through the Yamal Europe pipeline, and has no additional capacity via Ukraine.

Refinitiv gas analyst Xun peng stated that Gazprom can book extra volume if they want to. The current record-breaking gas price poses challenges to those who buy gas on the spot market.

CONSTRAINTS

Certain spot market statistics indicate that Russia has less supplies. Gazprom’s European spot sales for the same-year delivery of July-September were 0.5 bcm, as compared to 3.1 Bcm one year ago when European economies had not yet recovered, stated Dmitry Marinchenko (senior director, Fitch rating agency).

“It’s not clear if Gazprom has a modest exports level as a result production constraints or an attempt at ensuring a stronger market once Nord Stream 2 starts up,” he stated.

European gas prices fell in August after Gazprom stated it aimed at shipping 5.6 bcm via Nord Stream 2 in this year’s. However, they rose as that was in doubt due to delays in approvals. It is not clear if these flows will be available via alternative routes.

According to Ronald Smith, senior analyst with BCS Global Markets, “On the second quarter conference, management stated the Nord Stream 2 opening this fall would not actually make much difference in export volumes which implies redirection gas flows.”

He said that any extra supply can help to cool European prices.

Gazprom could not maneuver with much flexibility. Smith claimed that Gazprom had already reached its peak production rate of just under 1.5 bcm per hour. It does not publish monthly data.

According to Refinitiv data, Gazprom has stored almost 70% more gas in northern Europe than it did a year ago.

Europe could face more difficult times in future. Goldman Sachs (NYSE 🙂 expressed concern that Gazprom might not be able meet its contractual obligations this winter due to Gazprom’s extremely low inventory in North-West Europe.