European TTF gas prices higher on continued Russia shortfalls
Quantum Commodity Intelligence - European natural gas prices closed higher Wednesday, reaching fresh five-month highs, amid fears that Russia's ongoing supply cuts will prevent Europe from restocking ahead of winter, sending panic across markets and governments.
Russia said it would cut gas deliveries along the Nord Stream 1 pipeline to just 20% of capacity by Wednesday, prompting EU member states to announce a voluntary reduction of natural gas by 15% in time for winter.
Benchmark TTF gas prices were up 2.65% for the Aug22 contract, settling at €205.225/MWh and the highest since early March, when Russia launched its full-scale invasion of Ukraine.
The Aug22 contract was up around 28% from levels late last week of €160/MWh and 156% above mid-June prices of €80/MWh.
One year ago, the same Aug22 contract was trading at just €23/MWh, marking a near 800% price hike in 12 months.
Winter contracts also posted further gains, including the Dec22 contract which was up by 1.5% at €204.32/MWh.
However, TTF gave up most of the early morning increases, which at one point saw double-digit percentage gains for the third consecutive day.
Politics
Russia's decision to slash gas supplies to Europe has also sent panic through the US administration, as natural gas shortages are seen likely to undermine the Biden administration's plans to tighten sanctions against Moscow.
CNN quoted an unnamed US official Wednesday saying the Russian move was in retaliation to western sanctions and that it put the West in "unchartered territory" when it comes to whether Europe will have enough gas to get through the winter.
In response to the turmoil, the White House dispatched presidential coordinator for global energy Amos Hochstein to Europe on Tuesday, officials told the US news channel.
He will be travelling to Paris and Brussels to discuss contingency planning with the US-EU energy task force created in March, one month after Russia invaded Ukraine.
"This was our biggest fear," said the US official. The impact on Europe could boomerang back onto the US, spiking natural gas and electricity prices, the official said. It will also be a major test of European resilience and unity against Russia, as the Kremlin shows no signs of retreating from Ukraine.
