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Gas crisis set to worsen after Europe burns through winter stocks

Commodities Oct 05, 2022 01:00PM ET
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© Reuters. A gas burner is pictured on a cooker in a private home in Bordeaux, soutwestern France, December 13, 2012. REUTERS/Regis Duvignau
 
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By Essi Lehto and Kate Abnett

HELSINKI/BRUSSELS (Reuters) - Europe may face an even more acute energy crunch next year after draining its natural gas tanks to get through the cold of this winter, the head of the International Energy Agency said on Wednesday, as the EU looks for ways to ease the crisis.

European countries have filled storage tanks to around 90% of their capacity after Russia cut gas supplies in response to Western sanctions imposed over its invasion of Ukraine.

Gas prices, which surged in the months after the invasion in February, have retreated. But that could be short-lived as countries compete to buy liquefied natural gas (LNG) and other alternatives to Russian pipeline deliveries.

To help tackle the pain, the European Union is considering a gas price cap, an issue that has divided the 27-nation bloc as some countries worry it could make securing supplies harder.

"With gas storages almost at 90%, Europe will survive the coming winter with just some bruises as long as there are no political or technical surprises," said Fatih Birol, executive director of the Paris-based IEA.

The real challenges facing Europe, which had historically relied on Russia for around 40% of its natural gas, will begin in February or March when storage needs to be refilled after high winter demand has drained them to 25%-30%.

"This winter is difficult but next winter may also be very difficult," Birol told journalists in Finland.

European governments have moved to cushion consumers from the impact of higher prices and on Wednesday, Germany said it will subsidise power bills next year by paying just under 13 billion euros ($12.8 billion) towards the usage fees charged by the four high-voltage transmission grid companies (TSOs).

The fees form part of electricity bills, accounting for around 10% of overall costs for retail customers and a third for industrial companies in sectors such as steel or chemicals.

Berlin's intervention stabilises the fees, which otherwise would have risen three-fold given runaway wholesale power prices and rising operational costs for the TSOs, Germany's economy minister Robert Habeck said.

Until the Ukraine war broke out in late February, the Nord Stream 1 pipeline beneath the Baltic Sea from Russia to Germany was one of western Europe's main sources of gas.

Nord Stream 1 comprises two separate lines as does Nord Stream 2, which was filled with gas, but never allowed to deliver supplies to Europe as Germany suspended authorisation just before Russia invaded Ukraine on Feb. 24.

Three of the four lines have been disabled by what the West and Russia say was sabotage causing huge leaks and the Danish authorities said the fourth was being depressurised on Tuesday.

SABOTAGE?

President Vladimir Putin on Friday blamed the United States and its allies, allegations rejected by Washington. Russia has condemned what it called "stupid" theories in the West that it sabotaged the pipelines itself in explosions last week.

The Kremlin said on Wednesday that Russia must be part of investigations into the incidents, while one of Putin's allies said they recalled the U.S. Central Intelligence Agency-backed attacks on oil infrastructure in Nicaragua in 1983.

European Commission chief Ursula von der Leyen for her part said EU countries needed to step up protection of their critical infrastructure by conducting stress tests and using satellite surveillance to detect potential threats.

She was speaking in the European Parliament ahead of a meeting of leaders of the 27 EU countries on Friday in Prague when they will debate the EU price cap plan.

The details have yet to be worked out, but the idea has support from the majority of countries that see it as a way to deal with inflation. It has, however, faced opposition from Germany, Denmark and the Netherlands that cite concerns it will make it harder to secure supplies.

Von der Leyen said in her speech countries should also start jointly buying gas to avoid EU member states bidding against each other on world markets and driving prices still higher.

Earlier tensions in the gas market had eased as Russia's energy company Gazprom (MCX:GAZP) on Wednesday resumed gas exports to Italy via Austria after resolving an issue over guarantees that had led to the suspension of flows over the weekend.

Map: Leaks reported from Russian Nord Stream pipelines https://graphics.reuters.com/UKRAINE-CRISIS/ENERGY/xmpjozoewvr/leakage-map.jpg

However, Deputy Prime Minister Alexander Novak said on Wednesday that Russia may cut oil production in order to offset negative effects from price caps imposed by the West over Moscow's actions in Ukraine.

The price cap plan agreed by Group of Seven wealthy nations calls for participating countries to deny insurance, finance, brokering, navigation and other services to oil cargoes priced above a yet-to-be-determined price cap on crude and oil products.

Gas crisis set to worsen after Europe burns through winter stocks
 

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Comments (4)
Art Carrano
Art Carrano Oct 05, 2022 1:18PM ET
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Policies have consequences.
Eagle Gon
Eagle_PT Oct 05, 2022 1:18PM ET
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good consequence is bankrupting Russia
Ma Lu
Ma Lu Oct 05, 2022 1:10PM ET
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There are still a lot of people who will do anything to prevent the change from fossils to renewables. There's just too much money involved.
Art Carrano
Art Carrano Oct 05, 2022 1:10PM ET
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There are still a lot of people who will do anything to change from fossils to renewables. There's just too much money involved.
Warm Camp
Warm Camp Oct 05, 2022 1:01PM ET
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Socialism means that every winter is difficult, and energy is always in shortage.
Jurgen Daub
Jurgen Daub Oct 05, 2022 1:01PM ET
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yep, exacly just like Texas and soon Florida plus all or most of the other poor cons states
Warm Camp
Warm Camp Oct 05, 2022 1:01PM ET
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Jurgen Daub  As usual, your reply is primitively reactive.
Stephen Fa
Stephen Fa Oct 05, 2022 1:01PM ET
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Warm Camp That's being kind to Jurgen.
Matt Kay
Matt Kay Oct 05, 2022 1:01PM ET
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this is happening under capitalism....
Warm Camp
Warm Camp Oct 05, 2022 1:01PM ET
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Matt Kay  EU is much closer to socialism, then to capitalism.
Ken Roth
Ken Roth Oct 05, 2022 10:00AM ET
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Most european countries have plenty of gas in storage and could not care less if russia cuts of gas it will only hit the Russia fans Italy, tjekkoslovakia and hungary
Alex Growth
Alex Growth Oct 05, 2022 10:00AM ET
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Seems u have a short positoon hehe
 
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