LONDON: European gas buyers already grappling with record-high prices face further pain when the markets open on Monday after Russia said one of its main supply pipelines to Europe would remain shut indefinitely, sparking fears over energy rationing.
Lower gas flows from Russia ahead of and following its February invasion of Ukraine have already pushed up European prices by nearly 400% over the past year, sending electricity costs soaring.
Europe has accused Russia of weaponising energy supplies in what Moscow has called an “economic war” with the West over the fallout from the Ukraine conflict, while Moscow blames Western sanctions and technical issues for supply disruptions.
The Nord Stream pipeline, which runs under the Baltic Sea to Germany, historically supplied around a third of the gas exported from Russia to Europe, but was already running at just 20% of capacity before flows were halted last week for maintenance.
Expectations were high Russia’s state-controlled energy giant Gazprom would restart flows at 20% after the latest stoppage, leading benchmark Dutch TTF gas prices to fall back around 40% from Aug. 26’s record high to close at just over 200 euros per megawatt hour on Friday.
But after Russia scrapped a Saturday deadline for flows to resume, saying it had discovered a fault during maintenance, prices are likely to surge again, analysts said.
“On Friday… the market was already pricing in Nord Stream 1 (NS1) flows coming back,” Energy Aspects gas analyst Leon Izbicki said. “We expect a significantly stronger open for the TTF on Monday.”
Sky-high power costs linked to surging gas prices have already forced some energy-hungry industries, including fertiliser and aluminium makers, to scale back production, and led EU governments to pump billions into schemes to help households.
The impact of the latest cut would depend on Europe’s ability to attract gas from other sources, Jacob Mandel, senior associate for commodities at Aurora Energy Research, said.
“Supply is hard to come by, and it becomes harder and harder to replace every bit of gas that doesn’t come from Russia,” he said. — Reuters
