Europe Scrambles to Respond as Gas Prices Surge: Energy Update

Europe is racing to stave off an energy catastrophe this winter that’s threatening to turn into an economic and financial crisis too.

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(Bloomberg) — Europe is racing to stave off an energy catastrophe this winter that’s threatening to turn into an economic and financial crisis too. 

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Gas prices surged more than 30% on Monday as traders reacted to Russia’s decision late Friday to keep its main gas pipeline shut indefinitely. The euro also slid. Policy makers are now grappling with how to curb demand dramatically, and also prevent wild market swings spilling into broader financial disruption.

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Sweden and Finland created emergency backstops at the weekend to help utilities struggling with collateral requirements in a bid to prevent a “Lehman” moment. And European energy ministers are set to discuss radical proposals to curb power prices when they hold an emergency meeting on Friday — including gas-price caps and a suspension of power derivatives trading. 

Key Developments 

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German Storage Keeps Building (7:33 a.m.)

The European Union has been building up its gas stockpiles to offset a Russian cutoff, and with storage sites nearly 82% full it has a buffer for at least part of the winter. Storage sites in the region’s powerhouse Germany are now 86% filled, according to Gas Infrastructure Europe. But Klaus Mueller, president of the Federal Network Agency energy regulator warned last month that even with gas storage at 95%, there would only be enough for 2-1/2 months of demand if Russia switched off flows. — and a link to automated story

European Gas Leaps (7:15 am)

Natural gas prices surged in response to the Nord Stream news. 

“Given the gas supply tightness, one cannot exclude mandatory gas curtailment for non-essential industries or even ‘rolling gasouts’ this winter depending on the weather,” analysts at JPMorgan said in a note. Goldman Sachs predicted that European gas prices could approach highs set in August after Russia’s move.

Gas Flows Via Ukraine Are Stable (6:30 a.m.)

Russian gas supplies via Ukraine remain stable, data show. Flows have been curbed since May when one of two crossing points was put out of service. With Nord Stream shut, there’s going to be renewed focus on the flows via Ukraine. Norwegian gas flows are also curbed because of seasonal works.