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European gas rises 50% this week as Moscow cuts disrupt markets

Natural gas prices in Europe have headed for the biggest weekly gain since the early stages of Russia’s war in Ukraine, as mounting supply cuts from Moscow reverberate across the region.

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(Bloomberg) – Natural gas prices in Europe have headed for the biggest weekly gain since the early stages of Russia’s war in Ukraine as mounting supply cuts from Moscow reverberate across the region.

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Benchmark futures rose 8.4%, before paring gains to take this week’s lead to around 50%. Eni SpA will only receive half of what it requested from Gazprom PJSC on Friday, compared to around two-thirds the day before. German energy giant Uniper SE said it was receiving 60% less gas than ordered from Russia. The cuts are a blow to a region that is already struggling with runaway inflation and weak growth.

European politicians accuse the Kremlin of using the gas for political purposes, and the cuts coincide with a symbolic trip by Italian, German and French leaders to Ukraine this week. The European Commission said Russia was using its energy supplies for “blackmail”. Italian Prime Minister Mario Draghi has said Moscow’s claims that the cuts are due to technical issues are “lies”. Germany said Russia was trying to raise the price of gas and urged citizens to reduce their consumption.

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Flows through the Nord Stream gas pipeline – the biggest link between Russia and the European Union – have been reduced by around 60%. The region has feared for months that the cuts will come and has sought alternative supplies. While liquefied natural gas imports have helped fill any shortages and fill storage sites in time for next winter, an outage at an LNG plant in Texas has dampened US supplies.

“Storage was filling up at a good pace,” said Warren Patterson, head of commodities strategy at ING Bank. “However, that changed abruptly this week,” he said, adding that the reduction in the Nord Stream “is important” for Europe.

Missing volumes

Traders will be watching closely how Europe replaces missing volumes. Storage sites in the region are 52% full, after additional injections in recent weeks. But levels have started to fall again as buyers rush to fill the void left by Russia.

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“The biggest challenge facing the market is assessing the impact of the resulting slowdown on storage injections,” BloombergNEF analyst Arun Toora said in a note Friday.

BNEF cut its base estimate for stored gas by 10 billion cubic meters from an earlier forecast in May on the likelihood of further Russian cuts. If the supply from Moscow stops completely, European stocks could fall below the threshold required to survive the winter, according to Toora.

German gas flows to France halted as Russia cuts bull market

Moscow cited technical problems to justify the reduction in flows. Italy could trigger its emergency gas plan as early as next week if Russia continues to limit its supplies, a move that could involve asking companies to voluntarily limit their energy consumption, according to people familiar with the matter. situation.

Meanwhile, Freeport LNG has declared force majeure on shipments from its US export plant through the first week of September, people familiar with the matter said.

Dutch first-month gas futures, the European benchmark, were little changed at 124.91 euros per megawatt hour at 4:25 p.m. in Amsterdam, reversing an earlier gain. The British equivalent lost 5.4%.