European traders are withdrawing natural gas from storage sites at the fastest pace since 2012 as oil’s collapse to a five-year low prompts buyers to delay imports of Russian fuel to take advantage of lower prices next year.
Inventories at storage facilities in the 28 European Union nations fell 9.7 percent since Oct. 1, compared with an 8 percent drop in the same period of 2013, according to data from Gas Infrastructure Europe, a lobby group based in Brussels. Russian gas flows to Europe declined by 25 percent from a year earlier last month, state-run exporter OAO Gazprom said Dec. 1.
Russia meets about 30 percent of Europe’s gas demand, mostly under long-term contracts linked to oil. Tumbling crude prices will start to filter through gas contracts in the first quarter of next year as most deals include a six to nine month lag, according to Citigroup Inc. Crude fell to a five-year low as U.S. production expanded amid slowing global demand.
“European buyers are using the flexibility of their contracts with Gazprom to take minimum volumes, and that’s part of the reason why we see higher storage withdrawals than last year,” Moses Rahnama, an analyst at London-based consultants Energy Aspects Ltd., said by e-mail Dec. 12. “Given the warm weather, Europe is withdrawing much more than it should.”Read more