European Natural Gas Prices Rise With Threats From Russia

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A recent news article published in the Finance states that European Gas Extends Gains as Specter of Russian Cuts Persists.

European natural gas prices rise

European natural gas prices rose for a third day, with the threat of extended Russian supply cuts spurring concerns that the pace of restocking storage sites will be slower than expected.

Benchmark futures gained as much as 5.6% before paring gains.

The reduction in gas supply from Russia is making it more challenging to reach Germany’s storage target of 90% fill by the start of the winter, German Economy Minister Robert Habeck said.

The country’s storage sites were 58.4% full as of Wednesday.

Prices steadied after Russia’s threat

While prices have steadied after last week’s surge when Russia further tightened its squeeze on gas flows to the continent, imports from the key Nord Stream pipeline are still less than half capacity and the TurkStream pipeline supplying parts of southern Europe has shut for maintenance until the end of the month.

Cold Winter Could Push Europe Toward Gas Supply Shortages

“I think Europe will just about make it through the winter,” Carsten Poppinga, senior vice president for trading and origination at Statkraft SA, said in an interview. “Cold weather will be very decisive.”

“There is definitely reason for concern,” Germany’s Habeck said Wednesday, referring mainly to the throttled gas supplies from Russia via the Nord Stream pipeline, according to an account of a energy committee hearing.

Germany’s concern

Signs of Germany’s concerns were highlighted by preparations to trigger the next stage of its emergency gas plan, which would mean more efforts to reduce gas use by allowing energy companies to pass on cost increases to homes and businesses.

Gazprom PJSC’s shipments through Nord Stream remain at about 40% of capacity, which the Russian gas exporter has blamed on a technical fault.

This has reduced supplies to buyers in Germany, France, Italy and some other nations.

The Russian-German subsea link is the biggest gas pipeline to the European Union.

Canada, where a Nord Stream turbine is stranded for repairs, is in talks with Germany on how to provide the component while respecting the sanctions imposed on Russia over its invasion of Ukraine.

The turbines were manufactured in Canada and need to be regularly sent back there for maintenance.

Canada Working With Germany on Options to Restore Vital Gas Flow

“Further price climbs could strike suddenly in case of any new developments surrounding Russian gas deliveries,” Energi Danmark analysts said in a note on the energy trading firm’s website.

Norwegian flows to Europe have also dipped, as a compressor failure at the giant Troll gas field will reduce production on Thursday.

While operator Gassco AS estimates the capacity reduction to last one day, it says the duration of the outage is uncertain, after moving the cut by one day from Wednesday.

So far, price gains this week have been relatively muted. Still, market rates are about eight times higher than the seasonal average and industry is starting to slash consumption.

In the UK, industrial gas use has fallen by about 49% this year, “roughly the same order of magnitude below pre-pandemic demand,” Citigroup Inc. said.

Europe Industries Cut Gas Use as Continent Saves Fuel for Winter

Gas prices will probably stabilize if Russian gas supply doesn’t deteriorate further, EnergyScan said in a note Wednesday.

The tightened gas supplies prompted some countries to resort to coal for power.

Italy, one of the biggest buyers of Russian gas, is temporarily increasing coal-fired generation, joining nations such as Germany, Austria and the Netherlands in reviving mothballed power stations or removing limits on the dirtier-burning fuel.

Dutch front-month gas futures, the European benchmark, closed up 1.3% to 127 euros per megawatt-hour in Amsterdam.

The UK equivalent fell 11% to 183.6 pence a therm.

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Source: Yahoo Finance

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