Gas price soars on supply fears
August 22, 2022 - Gazprom has announced that it will shut down the critical Nord Stream natural gas pipeline for three days of maintenance at the end of August, pushing Europe’s benchmark gas price to a record high.
Natural gas futures linked to the Dutch TTF, Europe’s wholesale gas price, rose almost 20% to above €281 per megawatt hour, a new record high on renewed supply fears.
Russia’s state-owned Gazprom on Friday said it would cut flows through the Nord Stream pipeline to Germany for three days of maintenance from August 31, exacerbating concerns about supplies and raising the risk of a recession if Russia’s natural gas squeeze widens.
Gazprom has already reduced flows through the Nord Stream pipeline to roughly 20 per cent of its capacity, citing issues with turbines. On top of that, a drought triggered by an arid summer that set heat records across Europe threatens to halt energy shipments along the Rhine River while limiting hydroelectric and nuclear power production.
Europe relies on Russia for about one-third of its gas, and disruption to gas supplies could lift prices sky-high.
Europe has imported more liquefied natural gas (LNG) this year than in previous years. While importing LNG may help reduce the continent’s dependence on Russian gas, the problem is that European buyers now face a bidding war from Asian buyers.
Japan and South Korea are looking to procure more spot LNG for the winter, while China may struggle to meet demand following hydropower disruptions in the Sichuan region.