FX.co ★ Gas costs 1.5 times more than oil

Russia’s authorities and gas tycoons have a new reason for happiness. The fact is that the price of natural gas in the European market exceeded oil prices for the first time in many years. Thus, gas supply to European countries is expected to bring more profit than earlier.

Small gas reserves and the upcoming winter have boosted gas prices. Thus, gas futures for October delivery cost $660 per one thousand cubic meters that is approximately $110 per barrel of oil equivalent. In other words, now, gas in Europe costs 1.52 times more than oil.

Fitch Agency’s natural resources and raw materials expert Dmitry Marinchenko said that “European deposits now count for 10-15 billion cubic meters of gas less than they would need to cope with the winter season at best.” Some analysts suppose that scarce reserves in underground gas storage facilities could be a result of a very hot summer and Gazprom’s intention to launch Nord Stream 2 as soon as possible. The Russian company has allegedly reduced gas supplies through the Ukrainian territory to fill its domestic reserves. For example, by September 1, gas reserves in Ukrainian storage facilities totaled 18 billion cubic meters, which was 30% lower than in the previous year.

However, the triumph of the Russian gas companies will hardly be long-lived. The fact is the price of gas is more volatile than oil prices. Demand for gas is under the influence of weather conditions and high transportation and storage costs. What is more, there is no such organization, like OPEC+, that may control gas supply and its price.