Gas prices have surged for a second day, deepening Europe’s energy woes.
UK Natural Gas Futures soared 26 per cent, while prices rose by 10 per cent on the equivalent Dutch benchmark.
While a flotilla of US liquefied natural gas cargoes brought some relief to the region over Christmas, with prices dropping during the festive period, the benchmarks have rebounded amid increased demand from Asia alongside worsening tensions between Russia and Europe.
The spike in prices follows Russia continuing to cut its supplies to Europe in the new year, with the key Yamal-Europe pipeline recording reverse flows away from Germany to Poland for a 15th day in a row.
Russian supplies via Ukraine also remain constrained, after Kremlin-backed Gazprom has cut its daily volume of gas transit via Ukraine to Europe to about 50 million cubic metres, the lowest recorded level since January 2020.
Currently, Russia provides 35 per cent of Europe’s natural gas, and its exports to Germany will double if the Nord Stream 2 pipeline is certified by the country’s regulator.
The process was suspended late last year amid governance concerns, with no decision expected on the already completed £8.4bn pipeline until next summer.
The Ukrainian authorities believe Russia is reducing supplies into Europe to exacerbate supply shortages during the winter period and speed up approval of the Nord Stream 2 pipeline.
Meanwhile, Russian President Putin has previously dismissed claims that Russia is using gas as a weapon as ‘politically motivated blather’.
US President Joe Biden is currently set to meet with Putin over tensions on the Ukrainian border, which have also contributed to increased uncertainty and consequently higher prices.
Gazprom appeared to miss its export targets to Europe and Turkey last year, with export growth slowing to below five per cent in recent months, however it has repeatedly insisted it has met all its contractual obligations.
It has pocketed £179m in dividends from the current energy crisis – and has recently signed a long term deal with Greek utility firm DEPA commercial.
Europe is facing a serious energy crunch this winter, with the continent suffering from storage issues and supply shortages amid heightened demand.
There are now growing concerns over potential power shortages this winter, with Kosovo already rolling out blackouts last month.
This has been compounded by France reporting extensive technical faults with its ageing nuclear reactors, while Germany has chosen to close three of its remaining six nuclear power plants amid environmental and safety concerns.