Natural gas in Europe rises as outages increase supply risk for Russia

European natural gas prices soared, with outages in Norway and the US contributing to supply restrictions from Russia, further straining the market.

Enchmark futures jumped as much as 7.4 percent. Prices are about 14 times higher than the five-year seasonal average as a historic energy crisis destabilizes European economies, undermines the euro and increases pressure on politicians to mitigate the impact of the worst inflation in decades.

Due to maintenance work, lower inflows from Norway are expected until September. In the US, a key US export terminal damaged in an explosion earlier this year will delay its restart to November, down from an earlier target of October.

Meanwhile, Russia’s Sakhalin Energy LLC scrapped a shipment of liquefied natural gas to at least one Asian customer over payment problems, according to traders familiar with the matter. It is the first sign that Moscow’s bid to tighten control over gas is beginning to curb supply in Asia, which competes with Europe for LNG cargoes.

The European Union has relied heavily on supplies from the US and Norway to fill the gap left by Russia after Moscow halted supplies due to sanctions over its war in Ukraine. The crisis has fueled inflation, hampered industrial production and increased the risk of a recession in the region.

The block may need even more alternatives if Russia’s Gazprom PJSC halts flow of the vital Nord Stream pipeline for three days for maintenance from August 31. European authorities fear the pipeline may not return after the works.

“Europe simply doesn’t have access to enough alternative supplies to easily offset these Russian gas losses,” Samantha Dart, head of natural gas research at Goldman Sachs Group Inc., told Bloomberg TV. “LNG has helped keep European storage on track.”

The expansion of work at the Freeport LNG terminal in Texas is expected to take at least a dozen cargoes off the market, traders estimate. Buyers in Japan and South Korea counted on freeport shipments to replenish stocks ahead of winter and must now look to the spot market for more deals.

Gas supplies from Norway are down 5% as planned since last week and unplanned outages are piling up. Further works are also planned for the next month, according to grid operator Gassco, including the large Troll field and the Kollsnes gas plant.

LNG shipments from the US and more pipeline gas from Norway have helped European countries fill up storage facilities and prepare for the winter. Germany, which depended on Russia for more than half of its gas imports before Kremlin troops invaded Ukraine, has managed to reduce that share to about a third.

Dutch front-month futures, the European benchmark, were trading 6.6 percent higher at 286.75 euros per megawatt-hour as of 3:00 p.m. in Amsterdam. The contract was signed at a record high earlier this week. The UK equivalent rose 3.9 percent.

German electricity for the next year, a European benchmark, even rose by 1.3 percent to 633.75 euros per megawatt hour. It hit an intraday record earlier in the week. Natural gas in Europe rises as outages increase supply risk for Russia

Fry Electronics Team

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