Russian Gazprom eyes gas price hike for Europe as energy crisis worsens

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Through Dina Khrennikova, Olga Tanas and Elena Mazneva to 10/10/2021

MOSCOW (Bloomberg) – Gazprom PJSC has raised its 2021 price forecast for natural gas exports, while signaling caution over the volumes it could ship, as the energy crisis in Europe worsens.

The Russian gas giant, Europe’s leading fuel supplier, recalled that building up stocks at home was its top priority. It was only after filling its own storage facilities by the end of October that the company would consider a potential increase in exports to mainland Europe, Wood & Co. and BCS Global Markets wrote in separate notes on Friday. following a webinar with Gazprom executives.

Gazprom has raised its full-year gas price forecast for exports to Europe and Turkey to a range of $ 295 to $ 330 per 1,000 cubic meters, wrote Ildar Davletshin, head of the Russian research at Wood & Co. Mitch Jennings, senior analyst in Moscow. based at Sova Capital, also described the same price range. The revised outlook for Gazprom’s average prices in the region is good news for the company’s investors, as it indicates that higher dividends may be ahead.

Wood & Co. and Sova Capital also say Gazprom is sticking to its conservative estimate of gas supplies to Europe and Turkey for the full year, estimated at 183 billion cubic meters.

Gazprom did not immediately respond to a Bloomberg request for comment sent out of normal business hours.

Supply Attention

The energy crisis sweeping across Europe, due to the scarcity of supply exhausted by the rebound in demand, threatens to hamper the region’s economic recovery by driving up business costs and household bills and driving up inflation. As a result, Gazprom’s caution on shipments could disappoint some traders and policymakers hoping for an immediate increase in supply.

Russian President Vladimir Putin suggested on Wednesday that the country’s exports to Europe could hit a record high in 2021, but would not specify specific volumes or when the ramp-up could begin.

It is not uncommon for Gazprom to offer cautious supply prospects, as its sales are highly dependent on the weather, both in Russia and abroad. However, the company has been careful to reiterate in recent days that it is fulfilling all its contractual obligations and that it will aim to boost exports where possible.

Analysts say Gazprom views longer-term contracts and longer-term pricing as a tool that would help Europe mitigate the impact of extreme volatility.

Jennings of Sova Capital said the company may consider reverting the price of gas to oil in some contracts “because buyers might want less price volatility.”

Meanwhile, the gas rally in Europe is already signaling a record dividend for Gazprom. Earlier this year, BCS predicted that the gas giant’s payments in 2021 could exceed 40 rubles (56 cents) per share, more than double the record dividends of 2018.


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