The price of Russian natural gas supplied to Europe, have passed the bottom and started growing for the first time since the end of 2014, data from the International monetary Fund. In July 2016 the average price of Russian gas on the border with Germany — a tentative indicator of the cost of gas “Gazprom” for Europe, and $4,30 per 1 million British thermal units (BTU), reported August 5 IMF research Department (IMF Primary Commodity Prices). In may, the figure that had been declining for 17 months in a row, fell to a 12-year low ($3,99), and in June, symbolically grew (to $4,04).
While Russian gas on the border with Germany began to rise, competing gas on the spot market in Europe, by contrast, is cheaper. For the last month (7 July) the price of gas futures are quoted in pounds sterling, the British hub NBP decreased by 12.5% in terms of dollars today fell below $4,3 per 1 million BTU, which is below the price of Russian gas on the German border. In early summer the Russian gas was 20% cheaper than British hub reported.
“Our prices are based on formulas in the contracts. To respond to temporary excess of contract prices over the prices of hubs absurd,” — said the official representative of “Gazprom” Sergei Kupriyanov.
In dollar terms, the spot prices on the NBP, and on the other liquid pad — TTF in the Netherlands [many European traders prefer this platform, where contracts are denominated in euros] in July decreased — many players remain bearish gas futures for delivery in the coming months, says the analyst Bloomberg Intelligence on gas, coal and electricity Elchin Mammadov. “Gas on the market now abound, especially given pripremljene in Europe and the start of LNG exports from the United States and Canada,” he notes. At the same time, the increase in oil prices that occurred earlier this year, gradually translates to a higher price of Russian gas on the border with Germany, explains Mammadov.
Export prices of “Gazprom” under long-term contracts historically are tied to oil prices. In the last 3-4 months, the oil rose in price, and the price of gas “Gazprom” are adjusted with a certain lag in time, said a senior analyst of Sberbank CIB Valery Nesterov. And futures on the “spot” cheaper because of the results of voting at the exit of Britain from the EU (Brexit), seasonal characteristics of certain supplies, as well as excess gas coming through Nord stream” in anticipation of planned maintenance, which will start August 9 and will last 10 days, the expert adds.
Nesterov suggests that the Russian gas in Europe a short time will cost more than at European hubs. At least in the fourth quarter of 2016, the Gazprom’s gas will cost less, due to relatively low oil prices and the desire of the administration group to be competitive in the market and increase the spot component in contracts to Russian companies. According to Reuters, at the end of 2014, only 16% of the contracts, “Gazprom” was based on spot gas prices. But the company was planning to make it “more” European contracts, reported by the source Agency in may 2016.
Gas prices have reached bottom and should soon go up, promised in late may, the Vice-President of Board “Gazprom” Alexander Medvedev. “We have already reached the price bottom, so if the price of oil will not fall, and the price of gas also rises”, ” he mused.