Europe, gas and the law of meanness: how to make a bad situation even worse

It seems that the European energy sector is chronically unlucky this year. The conflict in Ukraine, sanctions, problems at French nuclear power plants – it would seem, where next? But no, the troubles of the Europeans continue.

First, due to sanctions problems with Siemens equipment, gas pumping through Nord Stream was reduced by 40%. Already unpleasant, but generally solvable. Then the German Energy Network Agency announced the start of an inspection of the state of Nord Stream, and therefore the gas pipeline would not work for 2 weeks in mid-July.

And the icing on the cake: the large Texas LNG terminal Freeport LNG, which had a fire a week ago, announced that it was partially suspending its operations, for about 90 days instead of the promised 2 weeks. And separately, each of these situations does not look like a global problem. But all together…

As a result, gas prices rose by about 20% as expected due to the reduction in supply, to about $1,000 per cubic meter, which is terribly high for a summer. Prices in the US, on the contrary, fell by about the same amount.

By the way EU just yesterday signed an agreement with Israel on gas imports. But “in the moment” this agreement will not change anything: it will take years to fully launch the East Med gas pipeline, it will be difficult to liquefy gas in the required volumes, and replacement of gas from Russia is needed now. A replacement that presents the EU with a difficult choice between recession and inflation.

Moreover, environmentalists are actively protesting against this pipeline, both in Israel and in Greece.

Meanwhile, gas prices rose again to $1,300 due to problems with the SP1 pipeline and a decrease in gas supplies from Russia through other pipelines. This is evidenced by the data of the London Stock Exchange ICE.

July futures on the index of Europe’s largest hub TTF opened Wednesday’s trading at $1,069 per 1,000 cubic meters, up 2.4% from Tuesday’s settlement price of $1,043.5. Prices soon accelerated to almost 9%, above $1,130 and then in the $1,053-$1,097 range.
Then the Gazprom company announced that it was stopping the operation of another Siemens gas turbine at the Portovaya CS, and from June 16 it would be able to supply no more than 67 million cubic meters of gas per day to Nord Stream.
After that, gas quotes on ICE began to grow rapidly, by 16.52 Moscow time they had exceeded $1,200 per thousand cubic meters, and by 18.00 Moscow time – even $1,300. The maximum trades so far is 1301.2 dollars (+24.7%).

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