Salem Radio Network News Wednesday, June 29, 2022

Business

Russian gas flows to Europe fall short, threaten storage buildup

By Nina Chestney

LONDON (Reuters) – Russian gas flows to Europe fell short of demand again on Friday, coinciding with an early heat wave gripping its south and boosting benchmark prices on concerns the continent may struggle to build up storage in time for winter.

Italy and Slovakia reported receiving less than half of the usual volumes through the Nordstream 1 pipeline, which crosses the Baltic Sea from Russia to Germany and accounts for around 40% of Russian pipeline flows to the European Union.

France reported it was receiving no Russian gas from Germany since June 15. Germany’s Uniper said it received 60% less gas from Russia than agreed but was able to fill the shortfall elsewhere.

Germany’s energy regulator described the situation as “tense” but said German gas supplies were stable at the moment.

EU’s reliance on Russian gas and a risk that Moscow could cut it off in retaliation to economic sanctions imposed after its invasion of Ukraine has been a major headache for the bloc, prompting it to build up inventories and seek alternative supplies.

An unusually early heat wave across parts of Spain and France added to the concerns, prompting more gas buying as demand for electricity needed to power air conditioning spiked.

The wholesale Dutch gas price for July, the European benchmark, was up 6% by 1318 GMT, while prices of power supply contracts also rose across Europe. [EL/DE] [NG/EU]

Italy’s Eni said it would receive only half of the 63 million cubic metres per day it had requested from Russia’s Gazprom on Friday, after experiencing a shortfall the two previous days.

Italian Prime Minister Mario Draghi, who visited Ukraine together with his French and German counterparts on Thursday, accused Moscow of using its gas supplies for political reasons.

But Russia has said the pipeline is delivering less gas to Europe because of the slow return of equipment made by Germany’s Siemens Energy that was sent to Canada for maintenance. Moscow must wait to see how the company and Canada will address the delay, Deputy Prime Minister Alexander Novak said on Friday..

Canada earlier said it was in talks with Germany to resolve the issue.

HEAT WAVE DEMAND

Italy, which last year sourced 40% of its gas imports from Russia, aims to have the country’s gas storage at least 90% full for the winter season, up from 54% now.

Italy may declare the state of alert on gas next week if Russia continues to curb supplies, two government sources said, which would mean reducing gas consumption, rationing gas to industrial users and ramping up coal power generation.

Across Europe, storage levels have recovered this year thanks to strong liquefied natural gas imports. Inventories for the EU as a whole are currently at 52% of capacity, just below the five-year average and above the 43% seen a year ago, said analysts at ING Research.

“However, a prolonged outage will raise concerns over the ability of the EU to build enough storage going into the next heating season,” they said. They said in a “worrying” sign, storage levels fell this week for the first time since April.

In Denmark, the country’s energy agency said that while it could continue to fill stocks, it was happening at a slower pace due to reduced gas deliveries.

With temperatures soaring, Spanish power plants bought more gas to generate electricity on Wednesday than any other day since records began, transmission system operator Enagas said.

Gazprom could increase flows via Ukraine to make up for the Nord Stream shortfall but there has been no sign of it doing it yet. Added to that, flows via the Yamal-Europe pipeline have been flowing eastwards for several months rather than the usual westerly direction to Germany.

Nord Stream 1 is also scheduled for annual maintenance between July 11 and July 21 which will halt all flows.

The United States has been a crucial LNG exporter to Europe for months. But a blast last week at a major LNG export terminal in Texas will keep it idle until September and it will operate only partially from then until the end of 2022.

The facility, which accounts for about 20% of U.S. LNG exports, has been a major supplier to European buyers.

(Reporting by Reuters, Nina Chestney in LONDON, Stine Jacobsen in COPENHAGEN, Nora Buli in OSLO, Maria Pia Quaglia in MILAN, Miranda Murray and Maria Sheahan in BERLIN, Isla Binnie in MADRID, Tom Kaeckenhoff in FRANKFURT, Jan Lopatka in Prague; Editing by Tomasz Janowski)

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