No Time Left for You. The Energy Report 12/27/2024

Time, time, time, time, time/ No time for a gentle rain/ No time for my watch and chain/ No time for revolving doors/No time for the killin’ floor/ No time for the killin’ floor

There’s no time left for you. No time left for you.

Guess who said that time is running out and Europe could be left out in the cold.

  None other than Russian President Vladimir Putin .

Putin said there is no time left this year to sign a new Ukrainian gas transit deal.

Putin is blaming Ukraine who controls the pipeline that bring Russian gas to Slovakia, the Czech Republic and Austria and said he is open to using alternative routes around the Ukraine if they could get other countries to lift those pesky sanctions.

Ukrainian President Volodymyr Zelenskiy said he is ok with the continued transit of Russian gas on the condition that Moscow does not get paid  for the fuel until after the war ends.

I am sure that Russian President Putin is not so wimpy to jump at “’loll gladly pay you Tuesday for a hamburger today, opportunity.”

Now it might be too late.

  As Putin said yesterday that “There is no contract, and it is impossible to conclude it in three to four days.”

  Of course, when it comes to these deals there is always time if they want to find it.

European gas prices are surging in panic.
Bloomberg reports that Benchmark futures jumped as much as 5% on Friday, the most in a week.

Bloomberg said that Central European nations that still buy Russian gas have floated alternative solutions to keep the fuel flowing across Ukraine, but President Volodymyr Zelenskiy has rejected any arrangement that sends money to Russian coffers while the war continues.

As things stand, there will be no transit of Russian gas from Jan. 1, Heorhii Tykhyi, spokesperson for Ukraine’s Ministry of Foreign Affairs, said on Friday.

Reuters says Here is what happens if Russian gas transit via Ukraine is completely turned off and whom will be affected most.

Russian gas supplies to Europe via Ukraine are relatively small. Russia shipped about 15 billion cubic meters (bcm) of gas via Ukraine in 2023 – only 8% of peak Russian gas flows to Europe via various routes in 2018-19.

Russia spent half a century building its European gas market share, which at its peak stood at 35%.

Moscow has lost its share to rivals such as Norway, the United States and Qatar since the Russian invasion of Ukraine in 2022, which spurred the EU to cut its dependence on Russian gas.

EU gas prices rallied in 2022 to record highs after the loss of Russian supplies.

The rally won’t be repeated given modest volumes and a small number of customers for the remaining volumes, according to EU officials and traders.

Reuters says that Austria still receives most of its gas via Ukraine, while Russia accounts for around two-thirds of Hungary’s gas imports.

Slovakia takes around 3 bcm from energy giant Gazprom (GAZP.MM), opens new tab per year, also about two-thirds of its needs.

The Czech Republic almost completely cut gas imports from the east last year, but began taking gas from Russia in 2024.

Most other Russian gas routes to Europe are shut including Yamal-Europe via Belarus and Nord Stream under the Baltic.

The only other operational Russian gas pipeline route to Europe is the Blue Stream and TurkStream to Turkey under the Black Sea. Turkey sends some Russian gas volumes onward to Europe including to Hungary.

WHY DOES THE UKRAINIAN ROUTE STILL WORK?

While remaining Russian gas transit volumes are small, the issue remains a dilemma for the EU. Many EU members such as France and Germany have said they will not buy Russian gas anymore but the stance of Slovakia, Hungary and Austria, which have closer ties to Moscow, challenges the EU common approach.

The countries, who still receive Russian gas, argue it is the most economic fuel and also blame neighboring EU countries for high transit fees imposed on alternative supplies.

Ukraine still earns $0.8-$1 billion in transit fees per year from Russian gas transit.

According to Reuters calculations, Gazprom’s total pipeline gas exports to Europe via all routes in 2024 have increased to 32 bcm from 28.3 bcm in 2023, when they collapsed to the lowest level since the 1970s.

Russia could earn around $5 billion on sales via Ukraine this year based on an average Russian government gas price forecast of $339 per 1,000 cubic metres, according to Reuters calculations.

Russia’s gas pipeline export monopoly Gazprom plunged to a net loss of $7 billion in 2023, its first annual loss since 1999, because of the loss of EU gas markets.

Russia has said it would be ready to extend the transit deal but Kyiv has repeatedly said it will not do it. Another option is for Gazprom to supply some of the gas via another route, for example via TurkStream, Bulgaria, Serbia or Hungary. However, capacity via these routes is limited.

Hungary has been keen to keep the Ukrainian route open but said it would continue to receive Russian gas from the south, via the TurkStream pipeline on the bed of the Black Sea.

The EU and Ukraine have also asked Azerbaijan to facilitate discussions with Russia regarding the gas transit deal.

A senior source at Azeri energy company SOCAR told Reuters on Friday that Moscow and Kyiv have failed to agree on the deal brokered by Azerbaijan to continue Russian gas exports to Europe via Ukraine.

AS far as oil, the market seemed to be disappointed that the EIA report was not as bullish as the API.  Still the EIA as far as supply versus demand suggests a very tight market.

EIA reported that U.S. commercial crude oil inventories  decreased by 0.9 million barrels from the previous week. At 421.0 million barrels, U.S. crude oil inventories are about 6% below the five-year average for this time of year.

Total motor gasoline inventories increased by 2.3 million barrels from last week and are about 3% below the five-year average for this time of year.

Distillate fuel inventories decreased by 3.2 million barrels last week and are about 7% below the five-year average for this time of year.

Total products demand d over the last four-week period averaged 20.4 million barrels a day, up by 1.3% from the same period last year.

Over the past four weeks, motor gasoline product supplied

averaged 8.7 million barrels a day, up by 2.1% from the same period last year.

Distillate fuel product supplied averaged 3.8 million barrels a day over the past four weeks, up by 4.8% from,

the same period last year.

Jet fuel product supplied was up 11.6% compared with the same four-week period last year.

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