European energy prices soared to fresh records amid worsening fears over supply, with UK natural gas futures exceeding the threshold of 300 pence a therm for the first time ever.
Global fuel shortages are disrupting natural gas markets from the UK to China, as economies emerge from the pandemic.
Surging costs are threatening to raise inflation and starting to weigh on industrial production, with some companies in Europe forced to cut output. Concerns over gas storage levels in Europe are building as winter approaches, helping drive prices ever higher.
“The fiercely nervous sentiment on the market continues due to fears of reduced supply during the winter,” trader Energi Danmark said Tuesday.
Russian President Vladimir Putin said on Tuesday there’s “hysteria and some confusion” on European energy markets amid reduced investments into fossil-fuel extraction, according to Interfax news agency.
Europe’s gas stockpiles are at their lowest seasonal level in more than a decade, with domestic production lagging behind demand, while supplies from top seller Russia are limited and global competition for liquefied natural gas continues to intensify.
North Asia spot LNG prices also extended their rally, reaching a record $39.67 per million British thermal units on Tuesday, according to price reporting agency S&P Global Platts, amid output constraints and efforts by end-users to stockpile ahead of colder weather.
“If we have a cold start to the winter and we’re withdrawing gas, we’re not going to have any gas left by the time cold winter hits,” Catherine Newman, chief executive officer of Limejump Ltd., said Tuesday at an industry conference.
Nord Stream 2
Even news that Russia is readying its controversial new gas pipeline to Germany, a strong bearish factor for prices just two months ago, hasn’t cooled the rally. Nord Stream 2’s operator started filling the first part of the pipeline, preparing it for tests, and all technical papers were provided to Germany’s local authorities.
Yet, the precise timing for the start of supplies remains unclear given other regulatory approvals the link requires. A group of senior lawmakers in the European Parliament called on the bloc’s executive arm to ensure the project fully complies with European Union law.
It’s also not known how much fuel Russia’s Gazprom PJSC is able to add to its exports in the short term as the company continues to fill storages at home amid increased domestic demand. Russia is currently consuming more gas than before the pandemic as cold spells across the nation trigger an early start to the heating season.
The impact of Nord Stream 2 on gas futures for more recent delivery “is limited, given the severe supply-demand crunch seen late in 2021,” consultant Inspired Energy wrote in a note.
Source: ENERGY VOICE (originally published on 5th October 2021)