Link maker

European gas slips with a focus on the Russian Nord Stream link

(Bloomberg) – European natural gas prices swung between gains and losses, before stabilizing lower as traders weighed news on Russia’s exports and maintenance of its key pipeline to the continent.

Bloomberg’s Most Read

Gazprom PJSC has declared force majeure on deliveries to several European buyers, according to people familiar with the matter. The Russian gas giant, which had already curbed shipments to Europe and closed its main gas pipeline for maintenance, said in a letter dated July 14 that the force majeure notice applied to supplies from last month.

In June, Russia cut exports to Europe via the main Nord Stream route, citing delays in gas turbine maintenance due to Canadian sanctions against Moscow. A turbine was flown from Canada to Germany on Sunday and could arrive in Russia in about a week, Russian newspaper Kommersant reported on Monday. There is no clarity on what will happen next, with some buyers and officials in Europe fearing the pipeline – halted for separate annual maintenance last week – could fully return once work is completed on July 21.

Read: Russian gas supply cut risks 1.5% cut in EU GDP in worst-case scenario

“The market is repricing the risk that Nord Stream 1 may not reopen on Thursday,” said Ole Hansen, head of commodities strategy at Saxo Bank A/S. “Furthermore, the continued talks about delivering the turbine from Canada has lowered the geopolitical temperature somewhat.”

It remains to be seen whether the part will be installed and whether deliveries will return to contracted levels, he added.

Gazprom did not immediately comment on the force majeure. The clause allows a supplier not to fulfill its contractual obligations, essentially allowing it to cancel a delivery without being financially responsible for a replacement.

Read also: Russia turns the screw on the gas market and snubs transit reservations

Demand held back

Dutch first-month futures settled down 1.5% at 157.258 euros ($159.90) per megawatt-hour in Amsterdam, after gaining as much as 5.6% earlier. The UK equivalent fell 3.3%.

Market attention has also turned to demand destruction, given soaring costs and no relief in sight.

“All scenarios suggest that tight market conditions for natural gas are here to stay,” analysts at ABN Amro Bank NV said in a note. “Shortages in the market would be partially offset by demand destruction, but tight market conditions are likely to remain for years to come.”

European gas demand is already down 11% since the start of the year, despite electricity consumption rising 10%, Rosaline Hulse, principal gas analyst at Wood Mackenzie Ltd, said last week.

Read: Europe must cut gas demand now before ‘harsh’ winter, IEA warns

Meanwhile, temperatures in parts of the UK and France could reach record highs on Monday and Tuesday, according to forecaster Maxar. While this has boosted solar power generation – Germany produced a record amount on Sunday and is expected to top that level on Tuesday – it is also increasing demand for cooling. The heat wave is also pushing up world prices for liquefied natural gas.

Rising temperatures will hamper Europe’s ability to replenish gas supplies ahead of winter, Rystad Energy said in a note. European storage levels have improved since March but remain below normal for this time of year.

“Our updated scenarios show Europe will likely head into the storm much sooner than previously thought – and the region will be underprepared for the chaos it will bring,” he said. .

Bloomberg Businessweek’s Most Read

©2022 Bloomberg LP