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Surge in European gas prices as Russia turns off tap on major pipeline

After Russia’s state-owned energy company said it would reduce shipments through a major supply channel, gas prices in Europe rose.

Gazprom stated that it was shutting off the Yamal pipeline to Germanyvia Poland. This is in response to new sanctions imposed from Moscow on European gas companies.

They include Europol Gaz and Gazprom Germania, one of its former subsidiaries.

Most of the affected entities are located in countries that have imposed restrictions on Russiain retaliation for its invasion Ukraine.

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Robert Habeck, Germany’s economy minister, predicted that the drop in Russian gas deliveries would be compensated on the market at a higher price.

He stated that the overall situation was escalating.

“It is becoming clear once more that Russia uses energy as a weapon.”

Moscow’s latest retaliation has seen future TTF hub contracts, which are the European wholesale gas price benchmark for Europe, see significant increases. This will increase the burden on both households and businesses.

German gas storage is approximately 40% full. However, this is still a low level for the season. Stocks must be built up for winter when global demand for heating will increase and global supply will suffer.

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Senior analyst at Rystad Energy consultancy, Kaushal Ramesh stated that “Storage levels currently suffice to last most of 2022 even if Russian flow stops immediately, barring any unexpected events – but the outlook on winter 2022 supply looks a lot less optimistic.”

Image Robert Habeck, Germany’s economy minister, says that the situation is ‘escalating’

Gazprom stated in a statement that a ban was placed on transactions and payments to entities subject to sanctions.

Gazprom interprets this as a ban on Europol Gaz’s use of a pipeline to transport Russian gas through Poland.

Moscow’s sanctions were issued just days after Ukraine cut off the flow of Russian gas to Europe via a pipeline that runs through Ukraine. The sanctions were attributed to interference by the occupying Kremlin forces.

This was the first time that exports from Ukraine were disrupted since the invasion.

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