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2022-08-30 11:15:00

EUROPEAN GAS PRICES DOWN ANEW

EUROPEAN GAS PRICES DOWN ANEW

BLOOMBERG- Aug 30, 2022 - The European Union is set to meet its gas storage filling goal two months ahead of target as the bloc braces for a tough winter with Russia limiting supplies and soaring energy prices raging through the continent.

Reserves in the EU were filled up to 79.4% as of Aug. 27 compared with the target of 80% by Nov. 1, according to Gas Infrastructure Europe inventory data. The EU bolstered its storage rules earlier this year after levels last winter turned out lower than in past years, particularly in German sites controlled by Russian exporter Gazprom PJSC, a factor that added to sharp increases in energy prices.

Gas storage helps absorb supply shocks and provides around 25% to 30% of the fuel consumed in winter. With bigger reserves, European nations are slightly better placed to face a further supply cut as Gazprom starts unexpected maintenance on the Nord Stream pipeline on Wednesday.

Lower temperatures seen across Eastern Europe, and parts of the Iberian peninsular next week will also help nations to conserve more gas as less energy is expected to be needed for cooling.

European natural gas prices on Monday plunged the most since March after Germany said its gas stores are filling up faster than planned. The drop in prices brings some relief after a furious rally with futures still trading almost six times higher than a year ago.

The EU wants to cut dependence on Russia, the region’s biggest energy supplier in the past years. The flows are to be replaced by growing renewables, greater efficiency and imports of pipeline gas and liquefied natural gas from other suppliers in the Mediterranean region, Africa, Middle East and U.S.

An obligatory minimum level of reserves will reinforce the security of supply this winter and in the heating seasons ahead, the European Commission said earlier this year. European Commission President Ursula von der Leyen said Monday that the bloc would also take steps to intervene in electricity markets, intervening in the short term to dampen soaring power costs and eventually seeking to break the link between gas and electricity prices.

In Poland, reserves were filled up to almost 100% on Aug. 27 while Portugal’s storage was full. Italian storage was filled to 81%, while Hungarian to 62% and Bulgarian to 60%, GIE data showed.

In Germany, gas stores are filling up fast and are expected to meet an October domestic target of 85% full already next month, Economy Minister Robert Habeck said in a statement on Sunday.

But even with full storage sites, Germany risks not being able to make it through the winter if Russia stops gas flows, Klaus Mueller, president of the Federal Network Agency, the country’s energy regulator, said in an interview with Bloomberg News earlier this month.

The nation, EU’s largest energy importer, is restarting coal power plants to save gas. It’s also racing to bring online new infrastructure to import liquefied natural gas from across the globe, with the first two floating terminals set to start this winter.

French Prime Minister Elisabeth Borne, meanwhile, urged businesses to cut energy use or face possible rationing this winter if Russia halts gas deliveries.

“There could be brutal gas outages overnight and serious economic and social consequences,” she said in speech Monday, adding that “companies would be the first hit” by rationing.

With more than 90% of its gas storage currently full, France should have enough of the fuel to cope with a winter with average temperatures, Engie Executive Vice President Claire Waysand said Monday.

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Tags: EUROPE, RUSSIA, ENERGY, GAS, SANCTIONS, PRICE