Fears of disruption to its supply before phasing out Russian energy sources

The natural gas crisis in Europe is worse than it looks

The continuation of the Russian war on Ukraine increases the energy problems in Europe.

EPA

Natural gas prices in Europe are now still well below their record levels set last March.

However, developments indicate that the supply disruption was worse than markets had expected, following the start of Russian President Vladimir Putin's invasion of Ukraine in late February.

While the gas market bet on a short-term crisis lasting for several months, at that time, it now indicates a severe crisis during the next winter, and will continue through the next year until 2024. During the past few days, European gas prices as a whole have risen.

Economic analyst Javier Blas said in an analysis published by Bloomberg News Agency, that the shift in gas pricing is the most prominent development in the gas market during the past month, but it did not attract enough attention in European capitals.

Last week, the price of futures contracts for Dutch natural gas, which is the standard gas for the European market, rose to about 175 euros per megawatt hour, to double the price about a month ago, after the decline in the quantities of gas pumped by Russia to Europe, via the “Nord Stream 1” pipeline, claiming There are technical problems.

In contrast, the prices of spot gas contracts remained 30% lower than their highest levels during the first days of the war, at 227 euros per megawatt.

Gas supplies from Russia to Germany are scheduled to stop for 10 days to carry out scheduled maintenance work on the Nord Stream 1 pipeline that passes through the Baltic Sea, which is the most important link for natural gas flows to Germany.

Gas pumping stopped as of six in the morning local time last Monday, and it will return again early in the morning of July 21.

However, officials have great concerns that gas supplies may not return, as Russia's war against Ukraine continues.

rounds of penalties

Germany and other Western countries have imposed several rounds of sanctions on Moscow in an attempt to stop the fighting.

But many countries are also highly dependent on Russian energy sources, and in response Moscow has halted gas supplies to several countries, in what is widely seen as retaliation.

Russia's state-owned Gazprom has already significantly reduced the supply of gas pumped through the 1,200 km pipeline between Russia and northern Germany, citing delays in repair work.

Moscow attributed the delay to sanctions imposed by the West, an argument rejected by German Chancellor Olaf Scholz.

Only about 40% of the pipeline's capacity is currently being used, which has led to further price increases in the gas market, according to Germany's Federal Network Agency.

The maintenance work comes as Germany urgently seeks to reduce its dependence on Russian gas, with reservoirs also filled in preparation for the coming winter.

Fears are growing that any sudden loss of gas supply will have dramatic effects on industry as well as homes.

Concerns due to lack of gas

In turn, German Foreign Minister Annalina Birbock stressed that the German government will do everything possible to ensure that a further shortage in Russian gas supplies does not lead to a division in society.

"If our energy supply goes down and the heating supply goes down, we will work to make things fair," Birbock said last Monday after meeting her Japanese counterpart, Yoshimasa Hayashi, in Tokyo. The remaining three Germans run longer.

Birbock criticized Russia for being unpredictable, not only in the war against Ukraine, but also in terms of compliance with the rules regarding, for example, energy supplies.

Tension in Europe

Governments, markets and companies in Europe fear that the shutdown of the gas supply line due to the war in Ukraine will be extended.

Which will disrupt plans to store quantities of gas for the winter, and exacerbate the gas crisis that has led to emergency measures from governments and painfully high bills for consumers.

The Nord Stream 1 pipeline transports 55 billion cubic meters of gas annually from Russia to Germany under the Baltic Sea.

Canada said at the weekend that it would return overhauled turbines, but also said it would expand sanctions against Russia's energy sector.

German Economy Minister Robert Habeck said the country had to confront the possibility that Russia would suspend Nord Stream 1 gas flows beyond the scheduled maintenance period.

Kremlin spokesman Dmitry Peskov denied allegations that Russia was using oil and gas to apply political pressure, saying that shutdowns caused by maintenance were a regular and scheduled event and that no one was "inventing" any reforms.

While the gas market bet on a short-term crisis that will last for several months, when the war erupts in Ukraine, the matter now indicates a severe crisis during the next winter, and will continue during the next year and until 2024.

Annalina Birbock criticizes Russia for its unpredictability, not only in the war against Ukraine, but also in terms of compliance with rules regarding, for example, energy supplies.

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