EUROPEAN GAS PRICES DOWN AGAIN
BLOOMBERG- Sep. 29, 2022 - European natural gas prices fell after a two-day rally as traders assessed risks to supply over the winter amid heightened tensions with Russia, even as steadily filling inventories ease some nerves.
Benchmark prices declined as much as 6.4%, after rising 19% over the previous two days. The standoff between Europe and Moscow deepened this week after massive leaks were discovered at the Nord Stream pipeline system, which politicians are calling a deliberate act of sabotage. The Kremlin has said claims of Russian involvement are “absurd.” In response, Europe is moving to boost security at key infrastructure.
Russia’s Gazprom PJSC also warned Tuesday that flows through Ukraine were at risk because of a legal spat with the country’s state-run energy firm over transit payments. If these are halted, western Europe would be cut off, leaving just the TurkStream pipeline sending gas to Turkey, and some south and southeastern European countries. For now, supplies via Ukraine remain stable, albeit at the reduced levels since Russia’s invasion of its neighboring country.
“While the investigation into the cause of the pipeline damage is ongoing, a near-guaranteed supply cutoff will inevitably affect Europe’s gas supply this winter -- but even more concerning is the impact on gas storage inventories ahead of next winter,” said Emily McClain, an analyst at Rystad Energy AS.
Stockpiles have risen to about 88% of the continent’s capacity -- fuller than usual for this time of year. But an unusually cold winter could erode that quickly, and make it a difficult period without the normal Russian supply. Replenishing the reserves next year would also be harder.
The stockpile levels and European Union plans to tackle the crisis -- including measures to ease demand and boost liquidity for companies -- had helped ease prices from the highs of late August. But the tensions between Moscow and the West have taken centrestage again this week. The blasts in the Nord Stream pipeline, which has been shut over the past month, have dashed any hopes than gas will flow along that route to Europe any time soon.
Dutch front-month gas, the European benchmark, fell 5.9% to 195 euros per megawatt-hour at 10:24 a.m. in Amsterdam. The UK equivalent declined 13%.
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