Italy doubles Algerian gas imports as lower oil reduces supply costs
By ISIS ALMEIDA
Bloomberg
Italy is doubling imports of natural gas from Algeria as lower oil prices filter into long-term supply contracts, reducing costs of the heating fuel.
Algerian gas flows into the Mazara del Vallo entry point were 23.4 million cubic meters (825 billion cubic feet) this week, up from 10.7 million at the end of last month, according to data from Italian grid operator Snam Rete Gas. Italy’s imports of Algerian gas fell in March to the lowest level for that month since at least 2010.
A 50% drop in Brent crude prices since June is starting to filter into long-term oil-indexed European gas contracts with countries including Algeria, Norway and Russia. About half of the continent’s gas deals are linked to the price of crude and oil products such as diesel, with a time lag of six to nine months.
“Up until a few weeks ago, Italy had been minimizing the take under their Algerian gas contract, but now with lower prices weighing on oil-indexed contracts, Italy is taking more,” said Moses Rahnama, an analyst at Energy Aspects in London. “It’s the same story as Russian gas.”
Algerian gas flows are rising after traders boosted orders of Russian fuel last month. Russian gas imports through Ukraine rose 81% at the Velke Kapusany entry point on March 6, according to data from Slovak grid operator Eustream. Germany brought in 51% more fuel via the Nord Stream pipeline that day, data compiled by Bloomberg showed.
The price of gas under oil-indexed contracts is converging toward the spot level, potentially ending the hub discount for the first time since 2009, the International Center for Natural Gas Information, or Cedigaz, said. The average oil-linked Russian gas contract is already below the UK gas price for August, Bank of America said in a report dated April 2.
Higher Flows
Italy imported less than 20 million cubic meters/day of Algerian gas from Feb. 10 to March 31, the Snam Rete Gas data showed. The nation, the European Union’s third-largest consumer, brought in about 137 million cubic meters of the fuel in the first six days of this month, compared with 85 million in the first six days of March, the data showed.
Italian oil company Eni SpA has a long-term contract with Algeria’s Sonatrach. The deal has been renegotiated to bring prices closer to hub levels.
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