European Gas Prices Surge 22%, Set New Record High Again... Impact of Russia's Supply Halt

Yamal-Europe Gas Pipeline Gas Supply Halted
European Gas Prices Surge 22.7%...Up 10 Times Since Early This Year

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] European natural gas prices have once again hit record highs following news that Russia has halted gas supplies through the Yamal-Europe pipeline, a land-based gas pipeline heading to Germany. Concerns that Russia is weaponizing natural gas amid escalating conflicts between Russia and the West over the Ukraine border dispute have driven gas prices up. The onset of cold weather across Europe, coupled with a significant drop in Germany's wind power generation, also contributed to the price surge.

On the 21st (local time), the Dutch TTF exchange, a key benchmark for European gas prices, saw natural gas futures prices soar 22.7% from the previous session to 180.34 euros per megawatt-hour (MWh). This nearly doubled from 95.67 euros earlier this month and surged more than tenfold compared to 17.94 euros at the beginning of the year.

European gas prices skyrocketed after news broke that Gazprom, Russia's state-owned gas company, had stopped supplying gas through the Yamal-Europe pipeline, which connects to Germany via Belarus and Poland. On the same day, German energy transport company GasConnect reported that "gas supply through the Yamal-Europe pipeline has been redirected elsewhere, and Gazprom has not booked export capacity on this pipeline."

Previously, Gazprom had been steadily reducing gas transport volumes through the Yamal-Europe pipeline since the 17th. It is also reported that only 21.6% of the pipeline's total capacity was booked for January next year. CNN analyzed that "Russia is believed to have halted gas supplies as a measure to pressure Germany over the Ukraine conflict and the approval of the Nord Stream 2 pipeline operation."

However, Russia drew a clear line, stating that this gas supply suspension is unrelated to political issues. Kremlin spokesperson Dmitry Peskov said at a press conference that "the suspension of supply through the Yamal-Europe pipeline has nothing to do with the Ukraine issue or the Nord Stream 2 pipeline. It is entirely a commercial matter and a decision made by Gazprom, not the Russian government."

Experts predict that the upward trend in European gas prices will continue for some time due to overlapping factors such as the geopolitical crisis centered on Russia and seasonal influences. Ole Hansen, Head of Commodity Strategy at Danish investment bank Saxo Bank, told CNBC in an interview, "Since early this week, temperatures across most of Europe have dropped below freezing, marking the start of the cold season, and wind power generation in Germany has plummeted to its lowest level in the past five weeks. As demand for gas for heating and power generation is expected to rise significantly, the sharp increase in gas prices across Europe is likely to continue."

This content was produced with the assistance of AI translation services.