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Gazprom’s daily gas output rises for first time since January

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Gazprom PJSC’s daily natural gas production rose in August for the first time in seven months, rebounding from a multiyear low in July.

Russia’s biggest producer of the fuel pumped 829 million cubic of meters a day this month, up 7.1% from July, according to Bloomberg calculations based on preliminary data announced Wednesday by Chief Executive Officer Alexey Miller. Output so far this year reached 288.1 billion cubic meters, he said in an address published on the company’s Telegram channel.

The gas giant’s production and export performance is closely scrutinised by traders and policy makers for clues about future supply after curbs to Europe drove gas prices to records, pushing inflation to the highest in decades and bringing major economies to the brink of recession. Gazprom has capped or entirely stopped deliveries via key pipelines as Russia’s relations with the West have worsened amid the war in Ukraine.

Prices in Europe could rise even further to over $4,000 per thousand cubic meters, Miller said. That’s the equivalent of about 385 euros per megawatt-hour. Benchmark gas futures in the continent are near 246 euros a megawatt-hour, almost five time higher than a year ago.

The current gas crunch is a result of Europe’s sanctions on Russia and “fundamentally wrong decisions of foreign, Western regulators,” Miller said, reiterating earlier statements by Russian officials, who refuse to be blamed for the gas price surge in Europe. But insiders have said the Kremlin is using the supply cuts to raise the political heat on European leaders, forcing them to reconsider the sanctions and their support for Kyiv.

Export hike

Gazprom exported 223 million cubic meters a day last month to countries outside the former Soviet Union, up 7.8% from July, according to Bloomberg calculations based on figures provided by Miller. Since the start of the year, shipments to its main foreign clients have reached 82.2 billion cubic meters, he said.

Miller did not provide a breakdown of exports, making it difficult to precisely determine the reason for the higher daily flows this month. The hike could be driven by higher supplies to China via the Power of Siberia pipeline that “regularly” exceeded contracted volumes, Gazprom said earlier this month.

The growth in output could continue ahead of the winter when consumption typically rises. Historically, in the peak demand months of January and February, the company has pumped more than 1.5 billion cubic meters a day, the data shows.

Gazprom has significant flexibility in adjusting production volumes, depending on the market’s needs, according to Vyacheslav Kulagin, head of department at the Energy Research Institute in the Russian Academy of Sciences.

“Unlike with oil wells, it’s possible to cut or even halt gas wells without losing them, so Gazprom can reduce output and then restore it quickly without serious risks for future production,” Kulagin said.

© 2022 Bloomberg

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