Big Bounce: Russian gas amid market tightness
The big bounce in Russian gas production in 2021 has proven to be insufficient to meet the simultaneous spikes in demand at home and abroad. Russian gas output has risen robustly and has been close to its maximum productive capacities but the necessity to fill the depleted domestic gas storage facilities in Q3 2021 limited the availability of Russian gas for Europe when it was most needed. Indeed, Russian exports to Europe this year have reached the record levels last seen in 2018-19, focusing mostly on Turkey and Germany – the two markets that are connected to the Russian gas system by direct undersea pipelines. Moreover, with other supply sources to Europe falling, and given the changing geography of Russian reserves, it appears that Russia cannot single-handedly balance sudden spikes in European gas demand. Russia is not running out of gas and its prolific gas reserves allow Russia to meet much higher overall demand, but this requires time, money, and contractual assurances of offtake.