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The European Union will not get natural gas via pipeline from Russia before the end of the year, Fitch Ratings is now assuming.
The credit rating firm changed its natural gas outlook for the EU based on statements made by Russia’s President Vladimir Putin and other Russian officials, which indicated that the Nord Stream 1 (NS1) pipeline flows would remain offline until Russian sanctions are lifted.
“Those with a high dependency on NS1 supplies and low immediate options to diversify gas sources, like Germany, have limited room for maneuver,” Fitch Ratings analysts wrote, cited by Natural Gas Intelligence.
Fitch said, however, that it was not changing its outlook of the EU gas market balance because it had already predicted “highly depressed levels” of gas imports at least through December. On a positive note, the EU’s increased intake of LNG imports as a replacement for Russian gas, along with a reduction in natural gas demand (for now), could help to stave off a disastrous gas shortage. Also reducing the risk of an EU natural gas shortage is the fact that Germany—the EU’s largest economy—managed to fill its natural gas storage to 85 percent ahead of the winter months.
While the EU may ward off catastrophic natural gas supply shortages this winter, it is filling its storage with gas at today’s high prices. On Monday, the German Federal Statistical Office reported that the value of German imports of oil and natural gas had risen year over year while the actual volumes had decreased.
Weather will be an important factor in determining how the EU fares this winter with regard to energy. Another important factor is a potential price cap on Russian pipeline gas should the EU be able to reach a consensus on the contentious matter—and if so, whether Russia makes good on its promise to stop all supplies if it contradicts its interest.
By Julianne Geiger for Oilprice.com
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Julianne Geiger is a veteran editor, writer and researcher for Oilprice.com, and a member of the Creative Professionals Networking Group.