MOSCOW (Reuters) – Russian gas flows to Europe fell short of what was needed. This happened at the same time as an early heatwave that hit the south of the continent. This caused benchmark prices to rise, which were already high because of worries that the continent might not be able to store enough gas for the winter.
Italy and Slovakia said they were getting less than half of the normal amount of gas through the Nordstream 1 pipeline. This pipeline runs from Russia to Germany across the Baltic Sea and is responsible for about 40% of the gas that flows from Russia to the European Union.
France said that Germany hadn’t sent it any Russian gas since June 15. Germany’s Uniper said it got 60% less gas from Russia than was agreed, but it said it could make up the difference somewhere else.
The energy regulator in Germany said that the situation was tense, but that, for now, gas supplies in the country were stable.
The EU’s dependence on Russian gas and the possibility that Moscow could cut off supplies in response to economic sanctions imposed after its invasion of Ukraine has been a problem for the bloc. This has caused it to stock up on gas and look for other sources.
A heat wave that hit parts of Spain and France earlier than usual added to the worries. This caused more people to buy gas as the demand for electricity to power air conditioners went up.
The wholesale price of Dutch gas, which is the standard for the rest of Europe, went up, and the prices of power supply contracts also went up all over Europe.
Italy’s Eni (ENI.MI) said that Russia’s Gazprom (GAZP.MM) would only give them half of the 63 million cubic metres per day they had asked for on Friday. This was after they had been short two days before.
Mario Draghi, the prime minister of Italy, went to Ukraine on Thursday with the prime ministers of France and Germany. While there, he said that Moscow was using its gas supplies for political reasons.
But Russia said that the pipeline is sending less gas to Europe because Siemens Energy (ENR1n.DE) equipment that was sent to Canada for maintenance is taking a long time to come back. Deputy Prime Minister Alexander Novak said Friday that Moscow must wait to see how the company and Canada will deal with the delay.
Canada had said before that it was talking with Germany to figure out what to do.
DEMAND FOR HEAT WAVES
Two government sources say Italy could declare a gas alert next week if Russia keeps cutting back on supplies. This would mean cutting gas use, limiting gas to industrial users, and increasing coal power production.
Strong imports of liquefied natural gas have raised storage levels all over Europe. Analysts at ING Research said that inventories in the EU as a whole are at 52 percent of capacity, which is just below the five-year average and higher than the 43 percent seen a year ago.
According to Kateryna Filippenko, a principal analyst at Wood Mackenzie, Europe could theoretically reach its 80 percent storage target by November 1 if Gazprom restarts Nord Stream flows at full capacity, which is unlikely.
“However, if Nord Stream continues to send gas at 45 percent capacity or completely shuts down, Europe will only be able to fill its storage to 69 percent or 60 percent,” she said.
“If Gazprom keeps limiting flows, storage will run out in both cases during the winter, unless other demand or supply measures are taken or Gazprom sends more gas through Ukraine using available booked capacity, which we don’t think will happen,” she said.
With temperatures rising, Spanish power plants bought more gas on Thursday to make electricity than on any other day since records began, said Enagas, the company in charge of the transmission system. This beat a record set the day before.
Gazprom could increase flows through Ukraine to make up for the Nord Stream shortfall, but there has been no sign of that happening yet. On top of that, flows through the Yamal-Europe pipeline have been going east for a few months instead of west to Germany as they usually do.
Nord Stream 1 will also be shut down between July 11 and July 21 for its annual maintenance.
Since several months ago, the US has sent LNG to Europe. But because of an explosion at an LNG export terminal in Texas last week, it won’t be able to do its job until September. After that, it will only work part-time until the end of 2022.
About 20% of US LNG exports come from this facility, which has been a major source for European buyers.