Cuts in gas supplies from Russia are forcing European utilities to use stocks commonly used during the winter, Bloomberg reports.
In one of the latest indications of how the energy crisis in Europe is escalating, storage levels fell this week for the first time since mid-April, when traders usually start filling in, according to Gas Infrastructure Europe data ( GIE). This is contributing to the rise in gas prices to their biggest weekly rise since the Kremlin launched its war in Ukraine on February 24.
“It’s clear that this should not be the case when warehouses are full,” said Warren Patterson, head of commodity strategy for ING Groep NV. “This will be worrying for the market and is likely to boost prices.”
Russia has cut supplies to customers in Italy, Germany, France and Austria, with smaller cuts in other countries in recent weeks. Moscow said it had to cut capacity on the Nord Stream pipeline due to technical issues, but Germany described the cuts as “politically motivated” to raise prices.
The cuts from Russia coincide with the shutdown of a large liquefied natural gas (LNG) plant in the United States, another critical source of supply for Europe. This means that less fuel will arrive on the other side of the Atlantic for months.
Europe’s warehouses were about 52% full on Tuesday, with the latest GIE figures showing a one percentage point drop. Nevertheless, they remain close to the five-year average.
“The biggest challenge for the market is to assess the impact of the slowdown in gas leakage at storage facilities,” said BloombergNEF analyst Arun Toora.
Russian export company Gazprom PJSC said on Thursday it did not see a solution “now” to the Nord Stream issues. Gazprom could use the surplus capacity of pipelines crossing Ukraine to supply European customers, but has not yet opted for that. The connection is also scheduled for an annual maintenance shutdown next month.
Gazprom said on Thursday it did not see a “currently” solution to the Nord Stream issue. Gazprom could use the surplus capacity of pipelines crossing Ukraine to supply European customers, but has not yet decided to do so. The pipeline is also scheduled for an annual outage next month.
In the worst case scenario, where the Nord Stream pipeline closes completely, the region will not be able to reach the stock levels the European Union wants until November, according to Wood Mackenzie. This means that the area could be completely depleted of stocks by January.
Hans Van Cleef, senior energy economist at ABN Amro Bank NV, said he wondered “whether the annual maintenance of Nord Stream would mean a complete shutdown for a longer period of time or if it would continue. Time will tell.”