Natural gas prices surged after Russia halted its biggest pipeline to Europe indefinitely, plunging the region deeper into a crisis that could push major economies into recession and force rationing.
(Bloomberg) — Natural gas prices surged after Russia halted its biggest pipeline to Europe indefinitely, plunging the region deeper into a crisis that could push major economies into recession and force rationing.
Benchmark futures jumped as much as 35% as Gazprom PJSC made a last-minute decision late Friday not to turn the crucial Nord Stream pipeline back on after three days of maintenance. It was meant to restart on Saturday, but the company said an oil leakage was detected at a gas turbine that helps pump the fuel into the pipeline. There’s no indication how long it may take to fix it.
Europe’s politicians have been bracing for weeks for the halt, and are now rushing to put emergency measures in place. Sweden and Finland created backstops over the weekend to help utilities struggling with collateral requirements in a bid to prevent a “Lehman” moment. European energy ministers are set to discuss radical proposals to curb power prices when they hold a special meeting on Friday — including gas-price caps and a suspension of power derivatives trading.
The European Union has been building up its gas stockpiles in an attempt to prepare for the prospect of a Russian cutoff, and has a buffer for at least part of the winter. The situation could get worse once stockpiles dwindle, especially closer to the end of the heating season, or if the continent is hit with a severe cold snap.
“Given the gas supply tightness, one cannot exclude mandatory gas curtailment for non-essential industries or even ‘rolling gasouts’ this winter depending on the weather,” analysts at JPMorgan said in a note. European gas prices could approach highs set in August after Russia’s move, according to Goldman Sachs Group Inc.
Dutch front-month gas, a benchmark for Europe, was 26% higher at 270 euros per megawatt-hour by 8:01 a.m. in Amsterdam. The contract lost 37% last week.
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