Winter supply risks loom as European gas prices recover

Natural gas prices rose in Europe on Wednesday after three straight sessions of declines. The move follows warnings countries across the region that the winter ahead could be tough.

Dutch front-month natural gas futures, the European benchmark, were up more than 4% at 200.2 euros per megawatt hour.

For now, while gas storage levels across Europe are within normal limits pipeline flows continue to be stable, the possibility of supply disruptions Russia during peak demand seasons remains a concern, keeping gas prices high.

Since Russia cut gas shipments 40 percent in late July, shipments through Nord Stream, the main pipeline linking Russia to continental Europe, have largely stabilized at about 20 percent of the pipeline's capacity. Gazprom PJSC blamed turbine maintenance problems for the supply reduction.

It has also allowed European officials to shift their focus this winter to managing energy demand. The British government is reportedly drawing up contingency plans to prepare for days of blackouts that could hit industry even homes due to cold winter weather combined with gas shortages. In addition, cities across Germany are reducing lighting hot water supplies to avert disaster.

At the same time, the climate crisis threatens to exacerbate the region's energy crisis increase the cost of electricity. The Rhine River is expected to become innavigable on August 12 at a key air route in Germany as a heat wave hits Europe causes water levels to drop. The waterway is known to be Europe's main artery for transporting fuel, coal other industrial commodities.

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Source: Zhitong Finance APP