European benchmark gas prices jumped at the start of this week as Europe struggles to replace Russian gas losses to fill storage sites ahead of the winter.
At the start of trade on Monday, European gas prices rose by nearly 7% but eased later in the day. The significantly lower Russian deliveries to major economies, including Germany and Italy, have the EU worried it might not get enough alternative supply to fill gas storage and prepare for the winter.
EU member states are now required to reach a minimum 80% gas storage level by November 1 to protect against potential interruptions to supply. In 2023, the target will be raised to 90% full gas storage by November 1. As of June 26, gas storage in the EU was 55.7% full, according to data from Gas Infrastructure Europe, and the pace of injection into storage seems to have slowed in recent days.
Welcoming the adoption of the EU gas storage rules at the Energy Council in Luxembourg, Commissioner for Energy, Kadri Simson, said today, “It is now crucial that we press on with meeting the new storage targets and step up our preparedness in case the situation further deteriorates.”
Most EU members do expect the situation to deteriorate further. Last week, Germany triggered the second phase of its three-phase gas emergency plan as it braces up for the possibility of a complete halt of gas supplies from Russia via the Nord Stream pipeline.
Nord Stream is also slated for regular maintenance for two weeks in July, which will halt gas deliveries via the pipeline. EU members fear that the maintenance could be an excuse from Russia to further lower or completely stop supply.
Europe’s gas prices are the only commodity prices to have increased – by a lot – since the U.S. reported a higher than expected inflation on June 10, per data from Saxo Bank and the Bloomberg Commodity Subindices.
Since June 10, the gas price at the Dutch TTF hub, the benchmark for Europe, has surged by 55% due to risks of further supply shortages, while all other commodities have lost ground due to increased fears of recession, Saxo Bank’s Head of Commodity Strategy, Ole Hansen, said on Friday.
By Tsvetana Paraskova for Oilprice.com
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