MOSCOW/LONDON: The price of natural gas surged again in Europe on Wednesday after a delay in the approval process for a major new pipeline from Russia exacerbated worries about whether the continent will have enough gas this winter.
Germany’s energy regulator suspended the process on Tuesday for bringing the Nord Stream 2 pipeline online, dimming hopes that it will provide any significant gas supplies in the coming months and sending jitters through energy markets.
The price of gas next month in the Netherlands, which is considered to be a benchmark for Europe, jumped almost 8% on Wednesday to hit 101.30 euros per megawatt-hour (MWh), its highest since Oct. 18.
The price of gas at the beginning of next year also rose, with the market not expecting any major flows through Nord Stream 2 until late in the coming winter heating season, by the time demand may have already peaked.
“The timeline for the start of the pipe now appears longer than what we initially expected,” analysts at Goldman Sachs wrote in a note, adding that they now expected it to be up and running only in February next year.
The Dutch contract for gas in January leapt 7.8% to 101.61 euros per MWh on Wednesday while the British wholesale gas price contract for the first three months of 2022 surged almost 12% to 2.45 pounds per therm.
European governments are scrambling to soften the blow for consumers and businesses alike with emergency measures such as price caps and subsidies. One of the world’s biggest energy traders, Trafigura, also warned on Tuesday that Europe could face power outages this winter due to low supplies.
FUELING INFLATION
Higher energy prices in Europe and around the world are already feeding through to inflation rates, which may in turn push policymakers to raise interest rates sooner than expected.
Data published on Wednesday showed inflation rates in both the European Union jumped above 4% in October, more than double central bank targets, with gas prices paid by British consumers, for example, sky-rocketing 28%.
Gas prices in Europe, which gets a third of its gas from Russia, were also buoyed by a decline in exports this week from Norway, another key energy supplier to Britain and the European Union, due to maintenance work on its gas infrastructure.
Germany’s energy regulator said it had halted the certification of Nord Stream 2 because the Swiss-based consortium behind the pipeline needed to form a German subsidiary under German law to secure an operating licence.
In the first comments since news of the delay broke, the Kremlin said the certification was a “complicated process” and that it did not see politics behind the decision. Spokesperson Dmitry Peskov said the consortium deals with requests from the German regulator in a timely fashion and Russia must be patient.
Russian gas flows through the Yamal-Europe pipeline to Germany were steady on Wednesday morning and above levels at the weekend, data from German network operator Gascade showed.
The pipeline, which runs through Belarus - crippled by the migrant crisis and a stand-off with the West - is one of the major existing routes for Russian gas exports to Europe.
Adding to concerns about possible interruptions of gas exports from Russia, Belarussian leader Alexander Lukashenko has warned that he may shut the pipeline in a dispute with the EU.
Flows via the Yamal-Europe pipeline into Germany at the Mallnow metering point on the Polish border were running at an hourly volume of over 12,500,000 kilowatt-hours (kWh) on Wednesday, roughly the same as Tuesday, the data showed.
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