Gas prices hit 4-month intraday high as Russia cuts German supply
British and Dutch gas prices rallied on Wednesday with some contracts hitting their highest intraday levels since March after Russia further reduced gas flows via the Nord Stream 1 pipeline.
Russian gas exporter Gazprom said on Monday it was halting one more turbine on Nord Stream 1 for maintenance from July 27, which would cut capacity to just 20%, or 33 million cubic metres (mcm) of gas per day.
The front-month Dutch gas contract was up 26.18 euros to 222.50 euros per megawatt hour (MWh) at 0839 GMT, while the contract for September delivery rose 24.50 euros to 223 euros/MWh, both hitting their highest intraday level since early March.
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The British day-ahead contract rose by 25 pence to 360 pence per therm, while the contract for August delivery rose by 37.5 pence to 385 p/therm, both also hitting a 4-month intraday high.
"The unthinkable is happening, but the question remains is this due to maintenance that can come back on any minute or truly stopping energy exports in retaliation? Is it long term or short term?" a European gas trader said.
"(Storage) injections can be delayed a bit, at a cost of course but then what? It looks like the shortage is going to bite everyone," he said, adding prices were expected to remain high until there is some good news that could curb the rise.
Data on the Nord Stream AG website showed nominations nearly halved from 8 a.m CET (0600 GMT) and stood at 14,423,764 kilowatt hours an hour (kWh/h) for 0800-0900 CET (0600-0700 GMT) onwards, down from levels above 27,000,000 kWh/h previously.
Similarly, physical flows of gas through the pipeline declined to 24,746,896 kWh/h for 0700-0800 CET on Wednesday, down from 27,776,096 kWh/h an hour earlier.
Preparing for potential Russian supply cuts, EU energy ministers approved on Tuesday a proposal for all EU countries to voluntarily cut gas use by 15% in the August-March period from the average from 2017-2021.
Refinitiv analysts said this was unlikely to curb the bullish sentiment on European markets, however, given severe winter supply risks.
Germany's gas regulator said on Wednesday a gas shortage was still avoidable, but warned industry and consumers would have to work harder to save gas.
In the European carbon market, the benchmark contract rose 0.22 euros to 76.90 euros a tonne.
