Panic strikes the European gas market

In the second half of last week, the natural gas price on the TTF remained below €160 per MWh. Fears that Russia would not resume gas deliveries via Nord Stream 1 after the maintenance seemed unfounded. After the maintenance stop, approximately 40% of the pipeline's capacity was used again. That is the same level as before maintenance stop. This week, Russian state-owned company Gazprom reduced deliveries via the Nord Stream to approximately 20% of capacity. This decision has a major effect on the gas quotation on the TTF. Yesterday (Tuesday July 26) the TTF closed at €199,92 per MWh. This has increased further today and at the time of writing this article the rate stands at €208,81 per MWh.

Gazprom says it can no longer supply gas due to problems with a turbine at a pumping station that is part of the Nord Stream. Before the attack on Ukraine, one of the turbines was for maintenance by suppliers Siemens in Canada. The Kremlin claims that the transport of this machine remains subject to Western sanctions. Germany contradicts this and says that Russia is deliberately blocking the return of the turbine. This issue has been going on for months now, but because, according to Gazprom, there are problems with a second turbine, the transport capacity is declining further.

Energy war
Europe has doubts about the Russian interpretation of technical problems at the pumping station. Several sources say that Russia is using gas supplies as a means of political pressure. Technical problems are being used as an excuse to cut gas supplies and increase pressure on the EU, according to these experts. If Russia were really of good will, transport over the two other major pipelines to the EU could be increased, they argue. Transport on those routes has also been reduced far below normal levels in recent months.

An interesting detail is that Russia's reduction of gas supplies is almost equivalent to the EU member states signing an agreement to save 15% on gas in the coming months. Now that the Russians have further reduced gas supplies, the EU's target of at least 80% full gas storage facilities by the start of winter is in jeopardy. This in turn affects the price of LNG on the world market. Several importing countries fear that the EU will make even greater demands on the available LNG to compensate for the disappointing Russian gas deliveries. Various countries such as Japan and South Korea therefore fear that they will miss out next winter and want to build up stocks more quickly. That drives up LNG prices even further.