You're reading: Cold weather in Europe pushes spot gas prices towards $400

Moscow - The winter freeze that arrived in Europe a week ago has pushed Stary Svet spot gas prices up.

On Thursday, gas was up to $398.7 per thousand cubic meters on Britain’s National Balancing Point (NBP) virtual trading floor, 8.5% higher than the average price for the first ten days of this month. Contracts for Friday delivery and the approaching weekend produced prices over $406.

The average price for current Gazprom gas delivery prices was $400 under long-term contracts tied to oil, which have been the subject of price criticism.

The NBP hub, considered the most liquid in Europe, sets the price-movement trend for other floors in the region. Once prices on the NBP were the lowest in the region, but with the launch of Nord Stream on continental floors such as Holland’s TTF or Austria’s CEGH, the risk premium against the halt of gas flowing through Ukraine was eliminated, and now prices are a little lower than in London.

Because of the freezing weather, Europe is taking a lot of gas out of storage. Reserves in European underground storage facilities amount to 64.5% of maximum versus 72.2% a year ago, in Germany – 68.4% versus 78.3%. Gazprom is actively taking gas out of its storage facilities in Europe. The company removed 35.4 million cubic meters (mcm) of gas from underground on January 16, 7% of exports for the day.

All this provides grounds for assuming not only good exports in the winter (according to Interfax calculations, January 2013 exports of Russian gas to the West will rise almost 5% to 14.5 mcm), but also into the spring and summer pumping season.