EUROPEAN GAS PRICES GROW AGAIN
BLOOMBERG- Aug 23, 2022 - Natural gas prices in Europe jumped on Tuesday amid increasing fears that a fuel shortage during the winter could hit the region’s economy hard.
Benchmark futures rose as much as 5.2% to 291 euros per megawatt-hour, after settling at a record high on Monday.
Russia’s Gazprom will halt flows on its key Nord Stream gas pipeline for three days of repairs on Aug. 31, again raising concerns it won’t return after the work. Lower flows would jeopardize Europe’s efforts to fill storage sites to prepare for the colder months.
The instability generated by Russia’s restrictions increases competition for available supply and has shocked global markets, with prices rallying from Asia to the US. A further prolonged cut would exacerbate a crisis that has dragged on for months, raising inflation, curtailing industrial production and increasing the risks of recession in Europe’s largest economies.
Gas prices could rise to 400 euros per megawatt-hour if flows via Nord Stream stop in September, according to Leon Izbicki, a gas analyst at Energy Aspects Ltd. “Current prices have a significant impact on industrial gas demand in Europe, with our models indicating a yearly reduction in Western European industrial gas demand of 15% in 2022,” he said.
Germany, which is highly dependent on Russian gas to power its factories, household heaters and power plants, is particularly exposed to the crisis. The country’s authorities have been trying to seal deals to tap alternative energy sources, and have voiced concerns about the need for rationing during the coldest months of the year.
In a trip to Canada, German Chancellor Olaf Scholz on Monday said Russia is no longer a reliable business partner and emphasized the need to increase imports of liquefied natural gas. However, Europe competes for LNG with Asia, where countries are rushing to get more shipments through the end of the year.
While there is no relief in sight for supply, demand remains abnormally high for the summer. Hot and dry weather has translated into high air-conditioning use, low hydro-generation, and declining nuclear and coal-fired output, as European rivers dry up.
“Regarding price-driven demand destruction, although it is visible both in the data and anecdotally, this may have plateaued for the time being,” said James Huckstepp, head of EMEA gas analytics at S&P Global Commodity Insights.
-----
Earlier: