Taps Coogan – December 22nd, 2021

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It’s groundhog day again for EU natural gas markets as Russia is still throttling exports to the EU through the Mallnow terminal, one of the three main pipeline routes to export Russian gas into Europe, as the following chart from Bloomberg via Win Smart reveals.

As we’ve now pointed out a couple of times, import capacity is not the constraint leading to blisteringly high natural gas prices in Europe, global natural gas production is. Natural gas prices in Asia have been higher for much of the last few months and tight supplies have been cropping up from Brazil to Pakistan and even Russia itself.

That hasn’t stopped the Russian’s from adding to an already tight market by throttling supplies to Europe all Fall, just when the EU needed to build storage to make it through the winter.

As we’ve repeatedly noted, Russia is assuming that EU policy makers are not smart enough to differentiate between two problems: first a shortage of supply globally and second an artificial shortage caused by Russia, thrown on top of that first problem. To the Russians’ credit, they’re probably right.

The only sane takeaway from all of this is would be that Russia, while not violating the letter of its contractual obligations, is not acting in good faith as a supplier, which is their right to do.

Regardless, the Germans will presumably end up approving Nordstream 2 after promising really hard to not let the Russians reduce gas flows through Ukraine, which the Russians will eventually due anyways, because that was the whole point of building Nordstream 2 in the first place.