Gazprom’s Gas Exports Drop as Buyers Turn to Spot Volumes

(Bloomberg) --

Gazprom PJSC's daily natural-gas sales to key foreign markets slipped to the lowest in three months in April as customers turned to cheaper supplies on the spot market amid mild weather and a wave of LNG.

Europe has been importing record amounts of discounted liquefied natural gas on the back of muted demand in Asia and as Europe weans itself off fuel piped from Russia. That -- as well as reduced heating demand -- is keeping a lid on prices and prompting Gazprom's clients to book smaller amounts allowed under contracts and instead turn to more attractive supplies in the spot market.

“It is more economic” for customers to use the flexibility allowed under long-term accords with the Russian gas giant and seek alternative short-term supplies in the spot market, where the prices were lower in April than those under long-term deals, according to Thomas Rodgers, an analyst at ICIS.

Gazprom exported an average of 387 million cubic meters a day to countries outside the former Soviet Union last month, down 22% from March, according to Bloomberg calculations based on data published Sunday. The 50.1 billion cubic meters shipped in the first four months of the year were down nearly 27% from a year earlier.

Russia on Wednesday turned off supplies to Poland and Bulgaria in a dramatic escalation, making good on a threat to cut supplies if payments aren't made in rubles. The state-controlled producer said Sunday that it continues to supply gas in line with requests from consumers and is in full compliance with contractual obligations.

Gazprom doesn't provide a detailed export breakdown by country, making it difficult to assess flows to Turkey and most of Europe, the key market for its foreign supplies. Russian daily deliveries toward borders with European nations averaged 298 million cubic meters in the April 1-26 period, down almost 18% compared with average daily flows in March, Gazprom data show.

The drop in flows “is also linked with less gas demand during the spring and storage injection has already begun, which has relieved some nervousness of the market,” said Zongqiang Luo, an analyst at Rystad Energy.

Gazprom's supplies to China via the Power of Siberia link were up almost 60% on an annual basis in the January-April period, the producer said, without providing exact supply volumes.

Despite the recent cut-off in supplies, Poland has bought Russian gas via reversed flows from Germany, Gazprom spokesman Sergei Kupriyanov said Thursday. Reversed flows to Poland via the Yamal-Europe link were at some 30 million cubic meters a day, which was almost equal to volumes under the contract with Gazprom Export in previous days, he said.

Gazprom's daily production averaged 1.347 billion cubic meters in April, down 8.5% from previous month, according to Bloomberg calculations. It has pumped 175.4 billion cubic meters of natural gas since the start of 2022, down 2.5% from a year ago.

With assistance from Bloomberg