“We are in a gas crisis”: EU prices return to March records

Rising gas prices

From London ICE data shouldAugust futures on the TTF index, one of the world’s largest trading floors, opened the session at around $1,630. After dropping to almost $1,600, the price has risen again. The maximum price is currently $1,715 (+7.4%).

The historical maximum of $3,892 was reached on March 7 (+275% to February 23 price), and the estimated price for that day was $2,560.7 per thousand cubic meters (+146.5).

Then the nails fell. On June 6, the price fell below $900 per thousand cubic meters for the first time in three months. Since the end of February, the minimum settlement price has been set at June 8 – $878.5.

However, in mid-June, the cost started to rise again due to the decrease in gas supplies from Russia. RIA Novosti, citing analysts, reported that there are currently no prerequisites for lowering gas prices in Europe.

the price of democracy

The head of European diplomacy, Josep Borrell, wrote in an article for the Italian newspaper la Stampa that the reduction in Russian energy supply is creating difficulties for many EU countries.

“By the end of 2022, we will reduce Russia’s oil imports by 90% and rapidly reduce gas imports. “These decisions are gradually freeing us from the addiction that has long affected our political decisions,” he said.

He noted that the “rapid exit from dependence on Russian energy carriers” poses “serious difficulties for many countries” of the European Union. However, this is the price that the states of the union “have to pay to defend democracy and international law”.

In his view, the sanctions should prompt Moscow to “change its strategic calculations” “perhaps not in the near future”. He expects to see the effect of the restrictions very soon.

“As we do not want to go to war with Russia, economic sanctions are the core of this response (to the military special operation in Ukraine – socialbites.ca),” said the head of European diplomacy.

Emergency mode for gas

Some European countries have already implemented an emergency warning regime for gas. On June 23, Germany raised its level to second. This was announced by the Deputy Prime Minister, Minister of Economy Robert Habek.

“We are experiencing a gas crisis. Gas is a scarce commodity, prices are already high and we must be ready for the next rise,” Welt said.

Reuters explained that the second tier theoretically assumes that utilities can sell gas at high prices to businesses and households to reduce demand. At the same time, it is assumed that the market can withstand a lack of volume without government intervention. If the third, final and emergency level comes into effect, the authorities will regulate the gas market.

At the end of June, Denmark and the Netherlands introduced the first level of the emergency warning regime in gas supply due to possible interruptions in supplies from Russia. Italy is also considering declaring a state of emergency in the country.

supply interruptions

The day before, experts told RIA Novosti that the risk of reduced supply from Russia remains, putting pressure on the market.

“The increase in gas prices in Europe is due to the fact that the decrease in supply from Russia is ahead of the substitution possibilities. This creates risks that it will not be possible to replenish stocks at underground gas storage facilities during the upcoming heating season and European consumers may face supply shortages in winter,” said BCS Mir Investments stockbroker Igor Galaktionov. .

The decline in Gazprom’s exports is due to the suspension of supply through the Yamal-Europe pipeline since May, the reduction in pumping through the other two main corridors (North Stream and the Ukrainian gas transmission system), and the drop due to technical work. Supply via Turkish flow.” Gas supplies to countries that refused to switch to a new gas payment system in rubles were also stopped.

On 27 June, the European Commission announced on its website that the EU has approved new law mandating bloc countries to have underground gas storage facilities by 1 November this year. And in the following years, states will have to fill them 90% of the time.

“According to the new legislation, 18 (out of 27) Member States with underground gas storage facilities will need to fill their storage facilities up to 80% by 1 November and are encouraged to target 85%. It is said that the target will be 90% in the coming years.