Russian state-controlled Gazprom's share of the European gas market fell on the year in the second quarter, the firm said.
The firm had a 39.2pc share in the EU — excluding the Baltic states — and Turkey, Switzerland, Norway, the UK, Albania, Serbia, North Macedonia and Bosnia and Herzegovina, down from 43.2pc in April-June last year, data from a corporate filing published last week show (see market share graph).
And the proportion of Russian pipeline gas in the supply mix was down more sharply — by 6.7pc — Gazprom said. This suggests Gazprom may have upped sales of LNG or possibly gas from storage. Gazprom started selling LNG to Austria's OMV this year under a 1.2bn m³ contract. It delivered 198mn m³ in the second quarter.
Prompt prices across Europe — with the exception of Italy and Hungary — often held below the TTF front-month index's settlement in April-June, limiting the incentive for quick Russian take under long-term contracts tied to the index. This had largely been the case in the second quarter of 2019, although there had still been an incentive for strong receipts in Austria, Slovakia and Italy (see TTF v prompt graphs).
Overall European consumption was down in April-June from a year earlier, resulting in Gazprom's outright sales falling sharply (see demand graph).
And the European stockbuild fell on the year in the second quarter. Quick injections had helped boost Gazprom's sales in the second quarter of 2019. Some countries, such as Hungary and Romania, built up especially high stocks last summer to prepare for a possible halt to Russian transit through Ukraine this year.
Europe diversifies supply sources
LNG's share of Europe's supply mix rose in the second quarter from a year earlier, displacing Russian pipeline supply.
European regasification fell much less sharply in April-June than Gazprom sales (see LNG vs Gazprom graph).
The US and Qatar increased their European market share by 6.4pc and 2.3pc, respectively, in the second quarter, Gazprom said. Qatar had a 10.9pc share, judging by Gazprom data, while it is not possible to calculate the outright US market share based on the firm's data.
And Algeria — which supplies LNG and pipeline gas — reduced its market share by 2.6pc, Gazprom said.
Algerian pipeline supply is largely priced on an oil-linked basis. And Spain, France, Italy and Greece had little incentive for quick take last quarter, with European prompt prices holding well below oil-linked import costs and reflecting ample access to cheaper LNG and pipeline imports, including — at least at times — from Russia (see Algeria graph).
Weak consumption in northeast Asia stemming from Covid-19 pushed northeast Asian LNG prices to record lows in April-May, drawing uncommitted LNG cargoes to Europe and leaving the region with less scope to absorb Russian and Algerian pipeline gas.
Gazprom appeared to stop offering prompt supply on its online platform from late May, possibly because European prompt prices were at levels where it would no longer be profitable to offer gas for sale. Online sales made for prompt delivery periods on 21 May — the last day on which Gazprom recorded these sales — had a weighted average of €5.21/MWh. And northwest European everyday prices held well below this level for most of the rest of that month (see prompt prices graph).
Northwest Europe's regasification was higher year on year in May, before falling sharply in June, when availability in the Atlantic basin tightened following widespread US cargo turndowns and amid extended maintenance at the Yamal and Hammerfest liquefaction plants.
Weaker regasification lent support to European prompt prices in June, which rose above the TTF front-month index's settlement for the month of €4.84/MWh in several markets and increased the incentive for Russian hub-linked take (see sendout vs hub-linked graph).
And overall demand started to recover in June as lockdowns began to ease, even rising on the year in some of Gazprom's larger markets, including Germany, Italy, France and the Netherlands, driven in part by stronger power-sector gas burn. This may have allowed Gazprom to claw back some market share late in the quarter (see year-on-year demand graph).
Norway's European market share fell by around 0.1pc in the second quarter, judging by Gazprom data. The share of European production fell by 1.6pc.
LNG displacing pipeline gas diversified Europe's supply mix. The Herfindahl-Hirschman index (HHI) — a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them — fell by 17.7pc on the year in April-June, Gazprom said.
