GAZPROM CUT GAS SUPPLIES TO AUSTRIA JUST IN TIME FOR THE START OF WINTER

Russian PJSC Gazprom has decided to play its favorite game: oil pipeline politics.

Since November 16, Austria has been removed from the list of countries receiving Russian natural gas following a €230 million ($242 million) arbitration dispute between Gazprom and Austrian company OMV AG. OMV, not wanting to lose this money, has decided to delay payments to Gazprom.

As you may have guessed, it ended badly.

Unsurprisingly, European gas prices didn’t take this news very well. Futures rose 2.7% to 47.49 euros per megawatt hour as traders anticipated further disruption on the continent, which already has abundant energy reserves.

Europe’s gas supply has been on edge since the 2022 energy crisis, and any hint of trouble sends markets into a frenzy.

Credit to OMV: they keep calm and continue to work.

The company has assured that it will be able to meet its supply obligations from “alternative sources” – a clear indication that Europe’s increasingly interconnected gas network means Austria is no longer entirely dependent on Gazprom.

But time is running out, as winter looms over Europe's neck.

Even the mere hint of supply constraints makes governments nervous about heating bills and energy security.

Gazprom’s move is a reminder of Russia’s declining but still strong energy influence in Europe. Of course, the continent has spent the past two years diversifying its energy sources, buying LNG cargoes and connecting alternative pipelines, but Gazprom’s ability to generate excitement is alive and well.

As Europe’s heating season begins, the spat between Gazprom and OMV highlights how fragile the energy landscape remains.

This is a timely reminder for Europe to continue working on emergency plans and perhaps stock up on a few more blankets. Winter has arrived, and with it new geopolitical games.

The news comes after Gazprom increased its investment plans for 2024 by 4% to $16.9 billion in October, and after benchmark natural gas prices in Europe rose to their highest level since November on Thursday last year.