European gas prices jumped to an all-time high on Tuesday after natural gas on a key pipeline from Russia to Germany reversed flow eastward and freezing temperatures took hold in many parts of Europe.
The benchmark price for Europe at the Dutch Title Transfer Facility (TTF) surged by 11 percent early on Tuesday to a record 162.78 euros per megawatt-hour.
According to data from German operator Gascade, cited by Reuters, flows of natural gas from Russia on the Yamal-Europe pipeline via Belarus to Poland and Germany have been falling since the start of the weekend, stopped completely on Tuesday, and then reversed direction from Germany east to Poland.
Gas prices in the UK also surged to a new all-time high after hitting the previous record just a few days ago last week. UK gas prices soared to an all-time high of 350 pence per therm last Thursday, which was a massive 520 percent jump year to date. Today, the UK benchmark price hit 400p per therm—a new record.
Freezing temperatures across Europe, low Russian gas supply, and low wind power generation in Germany have all combined to send European and UK gas prices to new records today. Related: Oil Prices Crash On Renewed Omicron Panic
“EU gas and power open higher again today with gas flows from Russia on the Yamal-Europe pipeline dropping to near zero. Just as German wind output falls to a five-week low and freezing temperatures spread across Europe,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, noted.
At the start of this week, natural gas exports from Russia via the Yamal-Europe pipeline remain limited as true winter begins, Russia keeps more gas for domestic consumption, and Gazprom has not booked too much additional day-ahead capacity at auctions.
Traders are watching closely every tender in which Gazprom is set to book pipeline capacity via the main pipeline routes to Germany and Poland. Every time Russia doesn’t book too much additional capacity, Europe’s benchmark gas prices jump.
Some analysts and EU officials have said that Russia is deliberately keeping extra gas supply – the one on top of its contractual obligations – low amid the row over Ukraine and the delays in the certification of the Nord Stream 2 gas pipeline.
Russia denies there is a connection between its limited extra gas supply to Europe and the current events with Ukraine and Nord Stream 2.
“This is a purely commercial situation. You have to ask Gazprom about the details,” Kremlin spokesman Dmitry Peskov said on Tuesday, commenting on the halted gas flows to Germany via the Yamal-Europe pipeline.
By Tsvetana Paraskova for Oilprice.com
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Unfortunately it's not the politicos who suffer, at least yet. What was Marie's famous saying (just before the French Revolution started). Something to the effect of "If they don't have bread, let them eat cake."
The first is that Russia isn’t going to ship all the extra gas supplies it has to the European Union (EU) countries. It must keep some for its own people as temperatures in Russia could dip much far below zero than in the EU.
The second factor is the delay in the certification of Nord Stream 2 gas pipeline which cost $9.0 bn to build and which was supposed to bring additional 55 billion cubic metres (bcm) to the EU countries. The pipeline has been sitting idle since completion in September but the German energy regulator has been dragging its feet on certification since then.
If the Europeans want additional Russian gas supplies, they have to certify Nord Stream 2 immediately. Russia isn’t going to ship extra supplies via the Ukraine.
Another alternative is for the EU to ask the United States which has been inciting them against Nord Stream 2 to supply them with enough LNG to keep warm in this winter. Unfortunately, neither US, Qatari or Australian LNG nor Norway’s gas exports combined could satisfy the EU gas needs. Only Russia can. But it isn’t going to oblige until Nord Stream 2 gets an operational licence very soon.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London