RUSSIAN GAS COULD RISE

Russian gas imports into Western Europe could rise to a record this summer as utilities increase purchases from Russia, taking advantage of lower prices for oil-indexed gas contracts, analysts said.

Europe's biggest utilities have deferred taking delivery of Russian gas in the winter until the second quarter, when weaker oil prices worked through into gas contracts, making the supply cheaper.

They reduced purchases of Russian oil-linked gas by around one quarter from Jan. 1 but increased their buying from March 5, flow data on Reuters Eikon shows.

Caps on output from the Dutch Groningen gas field and gas exports from Western Europe to Ukraine left Western Europe's gas storage sites only a quarter full at the end of March, data from Thomson Reuters Point Carbon shows.

"For continental storages to reach a healthy level before the start of next winter, buyers have to take around 65 billion cubic metres (bcm) (of Russian gas) between April and September," Marina Tsygankova, an analyst at Thomson Reuters Point Carbon, said.

That equates to average daily flows of 350 million cubic metres (mcm), 70 percent higher than the average 201 mcm/day between October and March.

Such high flows are extremely rare and have never before occurred during summer months, raising questions whether they would be possible.

"Of course, there is a huge risk, but Russia has both production and transportation capacity to reach those levels," Tsygankova said, speaking after Point Carbon published its seasonal gas market outlook this week.

To ramp up supplies to Western Europe to 350 mcm/day, Russia would need to increase flows via Ukraine to levels last seen at the end of 2013, before the conflict in eastern Ukraine.

Ukraine is locked in a longstanding pricing row with Russia over gas but hopes to sign a memorandum with Moscow this month on supplies that will run until the end of March 2016, its energy minister said on Wednesday.

If Russia fails to ramp up deliveries, continental Europe would need to obtain more gas from Norway and Britain, which would boost UK gas prices, Point Carbon said.

However, increased deliveries of liquefied natural gas could make up for the shortfall, added Trevor Sikorski, analyst at London-based consultancy Energy Aspects.

reuters.com