Updated: Russian natural gas exports to Europe via Ukraine soar

Flows of Russian gas to Europe via Ukraine more than doubled on Friday, as Ukraine’s Naftogaz promised to fulfil a last-minute increase in Gazprom’s daily transit order.

Prompt contracts across central and eastern hubs fell on Friday as the market was inundated with the Russian gas. Exports into Germany, Slovakia and Austria all rose, with expectation among traders that the gas will eventually be placed into storage.

Data from Slovak transmission system operator (TSO) Eustream at 15:00 London time showed forecast flows of 106 million cubic metres (mcm) through the Ukrainian-Slovak Velke Kapusany border point for Friday, up from 60mcm on Thursday and 48mcm earlier in the week. Most of this gas was to be sent on to the rest of Europe, as expected deliveries to Austria through the Baumgarten border point stood at 106mcm, up from 67mcm which flowed through the border point on Thursday.

Ukrainian incumbent Naftogaz said Russian supplier Gazprom had increased its daily transit order to the EU by 58% to 174mcm on Friday, and that it would honour the order even though the agreement between the two countries states that daily volumes should not fluctuate by more than 4.5% at Uzhgorod and 6.5% at the other daily border stations.

As to where the gas would end up, multiple sources said that they expected the gas to be injected into storage.

One participant on the Austrian market said the gas would be injected into storage in order to make up for lost volumes from the Netherlands in the summer after a production cap was announced in March.

“We’re going to need quite a lot this summer, with the cap at Groningen,” he said.

The injection period usually begins in April – the start of the summer – but the source said “with current spot prices you probably want to inject now, or at least set off withdrawals”. A Czech traded agreed, saying that they “absolutely” expected to see lower withdrawals.

The Day-ahead at the German GASPOOL hub lost its premium to the front-month on Friday, making withdrawals in northern Germany, where a considerable amount of storage sites are located, less attractive.

As warmer-than-average temperatures are expected over the majority of Europe in the coming days, consumption is likely to be low so demand for the new gas is more likely to have come from higher injections.

Deliveries into Europe through the Russian Nord Stream pipeline also increased on Friday morning, up by a rate of 52mcm/day session on session to 99mcm/day. Flows through the connecting NEL pipeline, which transports gas to western Germany, were up by a rate of 33mcm/day from 3mcm/day on Thursday morning. NEL flows have been very low since late January due to expectations the primarily oil-indexed supply will be cheaper later in the year.

The weekend delivery contract at GASPOOL, which Nord Stream feeds into, lost €1.225/MWh session-on-session.

Daily nominations from Austria to Italy at the Arnoldstein border point also increased day on day to 97mcm, 33mcm above Thursday’s value, data from Italian grid operator SNAM showed. There was also a 16mcm drop in storage withdrawals over the same period.

An Italian trader told ICIS that market participants understood that Gazprom told its clients that the reductions to deliveries that began in October were due to end on Friday. According to the trader, this was another reason for the decline in contracts on Thursday. Another source on the Italian market said he was unconvinced this was the case. Julie Fisher and Thomas Rodgers