Gazprom says soaring spot gas prices could hit Europe's economy

Gas prices have surged by more than 800% this year.

Europe's soaring gas prices could destabilise the region's economy but co-operation between producers and consumers could help balance the market, the head of Russian gas producer Gazprom's export arm has said. 

Prices have surged by more than 800% this year, sparking concerns about inflation and energy poverty this winter. Russia said on Wednesday it was increasing supplies, providing some relief to markets.

Russia also warned that Europe's preference for more flexible spot market dealings over the kind of long-term supply contracts favoured by Gazprom, has left volumes and prices vulnerable.

"Currently, the European spot market shows a high price volatility and is disorienting both buyers and sellers, [this] brings risks of destabilising the entire regional economy," the head of Gazprom Export Elena Burmistrova said.

"The European spot market only reflects the current state of demand and supply but is not the pricing tool which provides a long-term balance."

Gazprom's traditional oil-linked contracts come with a price lag, staying at a higher price for a prolonged period of time after spot oil prices ease but also at a lower price in times of soaring prices.

Ms Burmistrova reiterated that Gazprom was meeting its obligations under long-term contracts.

"We are supplying gas in addition to contract requests where we have such a technical possibility," she said.

Russian president Vladimir Putin had said earlier this week that Moscow did not need turmoil in the gas market, and that Russia should sell more gas on its St Petersburg exchange, which offers gas for European spot buyers. 

He had said Russia may increase supply on the spot market provided there is no harm to its plans to properly fill domestic gas storages. 

Natural gas prices, particularly in Europe, have rocketed this year due to lower-than-usual stocks. 

Record high energy prices in the UK and in Spain have already caused some industrial companies, such as steelmakers and fertiliser plants, to curtail production and even led to warnings of food shortages this winter.

The squeeze has also been felt in China, where power usage has been restricted by authorities. 

• Reuters