The price of natural gas in Europe has increased by almost 30% today after Gazprom said late on Friday it would keep Nord Stream 1 offline until further notice. Electricity prices registered a similar gain.
On August 31, as previously announced, Gazprom closed the Nord Stream 1 gas pipeline for three days for maintenance. But on Friday afternoon, it announced that an oil leak had been discovered on a gas compressor unit at the Portovaya compressor station near St. Petersburg. Gas transmission via the Nord Stream 1 gas pipeline has been shut down in full until the operational defects in the equipment are eliminated, said Gazprom.
The Russian company’s announcement came just a few hours after the G7, which comprises United Kingdom, United States, France, Germany, Italy, Japan and Canada, agreed to cap the price of Russian oil. The limit has not yet been determined, while the date of the implementation is expected to be similar to the European Union’s embargo on Russian oil – December 5, the BBC reported.
— Gazprom (@GazpromEN) September 2, 2022
Before the shutdown, Nord Stream 1 operated at 20% of its capacity, about 20 billion cubic meters of gas on an annual scale. Gazprom first reduced deliveries from 100 billion to 40 in June, and then to 20 billion cubic meters in July. It attributed the cuts to technical problems caused by Western sanctions. However, European countries rejected the explanation as false, and said Russia is blackmailing them using energy. Gas is currently still coming to Europe through two pipelines, via Ukraine and Turkey.
Front-month futures at the Dutch TTF spiked in early trade to EUR 284 per megawatt-hour (MWh) or 30% from the Friday settlement. The level was still lower than the record of over EUR 330 registered in late August.
The benchmark price slumped 30% from the peak in the meantime before the current surge as traders focused on Germany’s confidence it would fill up its storage facilities to 85% by the beginning of September. The situation is similar in most European countries.
Electricity prices followed suit, as they have been tightly correlated to natural gas. One-year German futures at the EEX exchange soared almost 30% to EUR 650 per MWh.
German energy prices are on the rise again. Gas price jumps 30.4% while 1y power price +29% after Russia cut off the gas. pic.twitter.com/qbnjGmJKzb
— Holger Zschaepitz (@Schuldensuehner) September 5, 2022
In its latest statement, Gazprom said Siemens Energy from Germany is working to overcome the issue. The Russian company claimed Siemens informed it that the leakages can only be repaired at a specialized facility. However, Siemens Energy said such leaks can normally be sealed on site without affecting the operation of a gas pipeline.
On Friday, EU energy ministers will discuss electricity market reforms and measures to limit the impact of the price of natural gas on the price of electricity.