Europe's energy crisis deepens as Russia cuts gas exports

Russian exports of natural gas to Europe fell over the weekend and into Nov. 1, with a complete pause in delivery via the Yamal pipeline deepening the continent's already acute energy crisis.

Coinciding with the new gas month and the meeting of world leaders and diplomats at the UN Climate Change Conference (COP 26) in Glasgow, the maneuver also came against a backdrop of ongoing deliberation over the fate of Russia's Nord Stream 2 dual-pipeline system, which is nearing completion but remains in the balance.

Having gradually ramped down exports via Yamal since August, German transmission system operator Gascade said physical entry flows at Yamal terminus Mallnow had fallen to zero, and even began flowing in the other direction. It had not switched back as November delivery began.

Moreover, nomination data from Slovakian TSO Eustream indicated its Velke Kapusany entry point for Russian supply via Ukraine was set to deliver just 43 million cu m/d, below the prescribed capacity according to the Russia-Ukraine transit accord signed in December 2019.

European wholesale natural gas prices rocketed to record highs in October, with front-winter contracts effectively doubling the previous record by their Sept. 30 expiry, and even surpassing the previous spot price record set in 2018.

October was also the most volatile trading month in the history of the market, with an absence of Russian volume for November now a probable cause.

Outside of maintenance, Russian exports via Yamal last dropped to zero in May 2020, shortly after a long-term capacity contract through Poland expired, and at the height of the coronavirus pandemic which saw prices fall to record lows, and damage to aggregate demand as economic activity slowed.

Russian exports via Ukraine via Velke Kapusany fell close to zero shortly after the transport agreement was signed, following negotiations which went down to the wire.