said Moscow was ready to work on stabilizing the global energy market, causing a sudden reversal in natural gas prices, which had earlier soared to their highest level on record.
The Russian leader appeared to be flexing his geopolitical muscles by signaling that he could help tamp down a growing crisis in Europe caused by a shortage of natural gas, a key energy source for producing electricity and heating homes. High prices in Europe have spilled over to the U.S. as well, with natural gas trading at its highest in over a decade.
Mr. Putin said Wednesday that Moscow was a reliable supplier that always fulfills all its obligations. “We can reach another record of deliveries of our energy resources to Europe, including gas” this year, he said.
Flows of Russian gas to Europe have been subject to intense debate among energy traders and officials in recent months, and will play a key role in determining whether prices remain at economically punitive levels.
Some officials, traders and analysts have said that Russia’s state-owned energy giant Gazprom PJSC has been slow to increase gas shipments even as Western European countries have struggled to rebuild inventories. Natural gas levels, which rose during the pandemic economic slowdown, are now far below normal levels heading into the winter months.
Higher prices are being interpreted in European capitals as an attempt to pressure officials and regulators into approving Nord Stream 2, a controversial pipeline linking Russia and Germany that is close to launching. The Kremlin has repeatedly said that Russia is fulfilling its contractual obligations.
Benchmark Dutch gas futures rose as much as 40% in morning trading to touch €162.13 a megawatt-hour. That was by far the highest level on FactSet data stretching back to 2013 and equivalent to $187.11 a megawatt-hour.
Prices then careened after President Putin said Russian gas supplies to Europe are set to reach a record this year. Mr. Putin blamed Europe for all-time high gas prices, and said that the amount of gas flowing via Ukraine is set to exceed volumes agreed under state energy giant Gazprom’s contract with Kyiv.
Gas futures skidded more than €50 after Mr. Putin’s comments to trade 9.5% lower on the day at €105.00 a megawatt-hour. Even after the retreat, European gas prices remained more than twice as high as they were a month ago and had risen more than fivefold this year.
The wild trading both before and after Mr. Putin’s comments speak to the strains being felt in markets. Traders and analysts said the spike in Europe on Wednesday morning was likely caused by a trader or utility closing out a loss-making short position rather than the prospect of a winter shortage.
Two factors could take the heat out of European gas prices, traders say: A prolonged spell of mild weather that saps demand, or an increase in flows of gas from Russia.
A large share of Russian gas exports to Europe transits through Ukraine, but that is expected to change after the Nord Stream 2 pipeline comes on stream, possibly in the next few months if the pipeline receives approval from European authorities. An adviser to the European Court of Justice helped clear the way to opening Wednesday, saying that Nord Stream 2 AG, the unit of Gazprom that built the pipe, is able to challenge rules stipulating that producers cannot control gas pipelines that deliver their fuel.
Kick-starting Nord Stream 2 would allow Moscow to export directly to Germany and bypass Ukraine and Poland, whose governments are critical of the Kremlin.
The U.S. fears Russia will use Nord Stream 2 to wield influence over Europe and punish pro-Western Ukraine. But the Biden administration waived sanctions on the project in May as it sought improved ties with Germany. Russia and Germany say Nord Stream 2 is a commercial project, providing a shorter and cheaper route for gas supplies.
“And we can say with confidence that we will exceed our contractual obligations for gas supplies through the territory of Ukraine,” Mr. Putin said, though suggested that increases would be limited. “Increasing volume is economically unprofitable for Gazprom, because it is more expensive.”
The price surge has taken a toll on energy-intensive industrial activity in Europe, prompting fertilizer plants to cut production in the U.K. and elsewhere. Several small energy suppliers in Britain went bust after failing to hedge against rocketing prices in the wholesale market. Consumers are set to face a steep rise in energy bills in the coming months.
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