Putin’s pledge for more supply can’t stop Europe’s gas price surge

(Bloomberg) –European gas futures continued their march upwards on Thursday, even after Russia pledged to deliver as much supply as the continent needs.

Europe’s largest gas supplier is ramping up deliveries in line with requests from customers and is “prepared to discuss any additional steps” to stabilize the market, President Vladimir Putin said on Wednesday. He blamed the region’s energy crisis on flawed policies rather than a lack of supply.

Despite Putin’s assurances, European gas prices continued to rise. The Dutch front-month contract climbed as much as 10% on Thursday, exceeding 100 euros ($116) per megawatt-hour for the first time since last Friday, before edging lower to 98.50 euros at 2:46 p.m. Amsterdam time. The U.K. equivalent also rose as much as 10% earlier, before falling back to 249.54 pence a therm, about a 6% gain.

European buyers have not yet asked the Russian government to increase gas supplies, news service Tass reported, citing Deputy Prime Minister Alexander Novak.

“The market seems to consider that the renewal of the historical partnership Putin is asking for from Europeans — with a clarification on the role of gas in their energy mix — could take time to materialize to resolve the short-term problem they are facing,” Engie EnergyScan wrote in a report. European gas is also probably getting a boost from rising Asian coal prices, it said.

U.K. within-day contracts rose as much as 11.6% on fears that low wind power generation will tighten gas markets further. The U.K.’s wind power capacity is forecast to drop to 1,384 megawatts at 7 p.m. local time on Friday, its lowest level in more than four weeks. Crimped wind power generation is likely to boost Britain’s emissions and power markets as well as natural gas, consultant Inspired Energy wrote in a note.

But while next-month delivery prices are high, contracts for shipping in 2022 are trading at less than half or one-third, Harry Huang, head of gas, power and derivatives trading at PetroChina International, said at a virtual conference on Thursday. “That perfect storm will pass,” he added.

Persistently high prices are the result of surging liquefied natural gas prices last winter, Melissa Lindsay, founder and CEO of LNG brokerage Emstream, said at the same event. “People’s willingness to pay high prices right now for winter cargoes is because of what they saw last year,” she said.