European Gas Extends Gains After Belarus Warns of Pipe Shutdown
(Bloomberg) -- European gas prices rose after Belarus President Alexander Lukashenko said he might consider shutting down a key pipeline linking Russia to Europe.
Benchmark European natural gas futures reversed earlier losses after the threat, which came in response to further sanctions against Lukashenko’s regime. About 20% of Russian gas flows toward the European Union passed Belarus territory so far this year, mostly via the Yamal-Europe pipeline, which also crosses Poland and ends in Germany.
The threat is yet another bullish factor just as traders were hoping for a breather. Russia boosted supplies to Europe this week to its contractual levels after President Vladimir Putin ordered Gazprom PJSC to fill its storage sites in Austria and Germany.
“We’re heating Europe and they are threatening us that they will close the border,” Lukashenko said at a government meeting Thursday, according to state news agency Belta. “What if we cut off natural gas flows there? Therefore, I would recommend the leadership of Poland, Lithuanians and other empty-headed people to think before speaking.”
Gazprom did not respond to a request for comment on Lukashenko’s statement.
Flows into Mallnow, Germany, where the Yamal-Europe pipeline ends, already are just a fraction of normal levels after deliveries via the route slumped in the past two months.
The news comes just as Norwegian flows to the continent also plunged amid unplanned outages, and temperatures in northwest Europe are forecast to slip to below seasonal norms from Sunday, remaining in that territory through early December, the Weather Co. data show.
The Karsto and Kollsnes gas processing plants had reduced capacity Thursday.
EUROPE GAS OUTAGES: Unplanned Cuts at Karsto, Oseberg, Kollsnes
Benchmark European next-month gas futures rose 7.1% to 75.10 euros a megawatt-hour by 5:45 p.m. in Amsterdam. The U.K. equivalent is up 7.7% to 193.90 pence a therm.
Should Lukashenko’s threat materialize, it would cut one of Russia’s three main routes to Europe. But Putin has brushed off a request by German Chancellor Angela Merkel to exercise his influence over Belarus as the European Union prepares a fresh raft of sanctions against the regime in Minsk for channeling thousands of migrants to the bloc’s border.
Russia and Belarus have had arguments over the gas transit route in the past. Gazprom in 2011 gained control of the Beltransgaz pipeline operator by acquiring the half of the company it didn’t already own for $2.5 billion. The transit route has had some disruptions in the past on gas disputes between Russia and Belarus.
In day-ahead auctions, Gazprom consistently books transit capacity that corresponds to existing contractual obligations. No extra capacity gas has been booked this week, and the attention now focuses on Monday’s monthly auctions.
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