European gas prices are closing in on record highs, after Russia followed through on its threat to further cut gas supplies into the troubled continent.
Gas prices spiked 12 per cent early on Wednesday and have climbed more than a third this week, from already historically elevated levels – amid increased fears Russia will turn off the taps ahead of winter.
This has raised the chilling prospect of supply shortages and blackouts during the coldest months of the year – with multiple European Union (EU) member states bringing in emergency gas plans in recent weeks.
Dutch TTF Futures spiked to €220 per megawatt hour, leaving the benchmark on track to hit a new record closing high, exceeding the previous peak in the following Russia’s invasion of Ukraine.
The latest surge has driven gas prices to roughly ten times the levels traded before Russia began squeezing supplies last year.
This follows Gazprom, the Kremlin-backed gas giant, cutting gas flows via the key Nord Stream 1 pipeline into Germany to just 20 per cent of full capacity.
The pipeline has only been operating at 40 per cent of expected levels in recent weeks, with flows supsended entirely for 10 days earlier this month amid scheduled maintenance.
Gazprom then announced supplies would be cut further due to problems with turbines at key compressor stations, which it blamed on Western sanctions.
This has been dismissed Kremlin has retaliated to Western restrictions on Russian oil and coal imports in recent months, cutting gas flows into 12 EU member states, while also demanding rouble payments from companies even if they signed contracts in euros and dollars.
This has left the scrambling to fill gas storage sites ahead of the cold winter months, with the bloc targeting 80 per cent capacity by September – with storage levels currently sitting at 67 per cent.
It has also reached a compromise deal to potentially cut gas usage by 15 per cent between August and March.
The geopolitical volatility has also driven up UK gas prices – which have risen seven per cent to £3.74 per therm.
For context, gas was trading at 58p per therm this time a year ago.
Soaring wholesale prices has driven the consumer price cap to £1,971 per year, with the latest forecasts from BHY Group estimating they could climb as high as £3,800 per year this January.