European gas prices continue to soar, temporary shutdown of Nord Stream | War in Ukraine

European gas prices continue to soar, temporary shutdown of Nord Stream | War in Ukraine

The EU's difficulty in amassing reserves to do without Russian gas in winter has driven prices up.

The European gas price continued its inexorable rise on Friday to end at a new closing record, boosted by the closure “for maintenance” of Nord Stream by the Russian giant Gazprom for several days.

The European Union's difficulty in amassing sufficient reserves to be able to do without Russian exports over the winter without creating a shortage has caused the price of the Dutch TTF futures contract to rise to 257.40 euros (335.76 CAD), unheard of at the end of the session.

During the session, it had only exceeded this level during the extremely volatile first days of Russia's invasion of Ukraine to reach an all-time high on March 7 at 345 euros.

The Lubmin gas terminal in Germany is the link between Russian oil and the distribution network of European gas.

While Gazprom has claimed that gas deliveries will resume after a shutdown from August 31 to September 2, the market remains nervous: the European Union accuses Moscow of using gas as a means of pressure as part of its invasion of Ukraine.

As a result, Germany's energy regulator signaled on Thursday that the country risks missing its tank filling target set by the government of Olaf Scholz.

Regulator chief Klaus Müller warned that shortages were to be expected in some regions during the winter, and that it was not a winter, but a winter. minus two, and the second winter could be even more difficult.

Europe is painfully trying to wean itself off Russian gas, on which Germany is particularly dependent .

In Germany, from October 1, importers will be able to levy 2.4 cents more per kilowatt hour (kWh) of gas from businesses and individuals.

Even though the government has promised to cushion it for the most modest, the shock on the October bill should lead to a reduction in household demand, comment analysts from Deutsche Bank.

Electricity, for its part, mechanically follows the evolution of gas prices, because the market is fixed on the cost of the gas (and coal) power stations called to the rescue to ensure the balance of the system.

Prices were driven by low wind levels [for wind power] as well as high costs for coal and gas power, Rystad analysts pointed out Energy.

At the same time, a particularly hot summer limited electricity production: the heat wave affected the cooling systems of nuclear power plants and the drought prevented barges from operating. #x27;bringing the coal to German power plants.

However, the heat wave stimulates electricity consumption for air conditioning and ventilation, limiting the usual drop in the summer months.

L& #x27;Electricity for delivery next year in Germany exceeded 500 euros per MWh for the first time in recent days, compared to just over 300 euros in early July.

“This could be Europe's biggest energy crisis for at least a generation.

— John Plassard, analyst at Mirabaud

In the wake of gas prices, oil, which had started the session down, rallied: +0.76% to $97.32 for the European benchmark, North Sea Brent for October delivery, and +1.14% to $91.17 for the US West Texas Intermediate (WTI) which arrives at due in September.

The rebound in prices does not convince all observers.

There are plenty of reasons to bet on a decline, but market participants seemed to have forgotten them for two sessions, comments Stephen Brennock, analyst at PVM.

He points out that volumes are particularly thin this summer, which promotes increased price volatility and prompts the analyst to give little credit to the rebound that began on Wednesday after a surprise drop in US stocks.

A global recession that would destroy demand remains the main concern, with discouraging data coming out of the euro zone and China, he adds.

Friday, the strength of the dollar, boosted by the prospect of a tightening of monetary policy in the United States, also weighed on oil.

As the ticket green is the reference currency of the oil market, its rise weighs on the purchasing power of investors who use other currencies.

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