European natural gas erased earlier gains, with traders weighing risks to Russian supplies against the continent’s drastic efforts to curb the energy crisis.
Benchmark Dutch futures for October declined as much as 9.6 per cent, with the market volatile amid thin trading and much uncertainty.
The European Union (EU) has met its gas storage filling goal two months ahead of target, providing some relief after last week’s rally. Yet, concerns are widespread that Russia may find another excuse to clamp down on exports to the continent, with its key Nord Stream pipeline to Germany halted on Wednesday for three-days of maintenance.
Separately, Gazprom said it would suspend gas sales to French utility Engie from Thursday because of a disagreement over payments. The move widens supply cutbacks, which have already driven Europe’s inflation to the highest in decades and brought the continent’s economies to the verge of recession.
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“The ahead-of-schedule injections are providing some relief, Wei Xiong, senior analyst at Rystad Energy, said in a note. “The risk to European winter supplies remains, however — given low transmissions from Russia.”
Both Germany and France have said they are much better prepared for Russian supply disruptions now, thanks to steps to reduce reliance on exports from Moscow after its invasion of Ukraine, and due to increased fuel inventories.
“As we had expected, Russia is using gas as a weapon of war, French energy transition minister Agnes Pannier-Runacher said Wednesday. “France has prepared for this scenario since the spring: the filling of gas storage will reach its maximum in about two weeks.
EU leaders are coming under increasing pressure to act as energy contracts are trading at elevated levels, even though they’ve retreated from recent peaks. The block is preparing to intervene in the short term to dampen soaring costs, but the details are yet to be hashed out. Energy ministers are set to discuss options at an emergency meeting on September 9th. — Bloomberg
