European gas prices touched an all-time high when gas flow from Russia reversed course as freezing winter weather set in over the continent, and renewable sources, such as wind, have failed to generate reasonable amounts of power.
The benchmark price for Europe at the Dutch Title Transfer Facility (TTF) is at a record 162.78 euros per megawatt-hour, showing an increase of 11 percent on Dec. 21. Natural gas flows on the Yamal-Europe pipeline have been declining, from a Dec. 16 average of 12,000,000 kilowatt hours to almost 1,200,000 kilowatt hours on Dec. 18, before halting completely on Dec. 21. Then the flow reversed toward Poland from Germany, according to German operator Gascade.
Russian state-owned Gazprom, the largest supplier of natural gas to Europe, sends gas via several routes and books extra volumes, based on demand, through auctions. The delivery is then routed through Ukraine, and through the Yamal route, via Belarus, to Germany.
As winter has begun to take hold, Russia has reserved more gas for domestic usage, while Gazprom hasn’t booked additional deliveries at auctions. Traders closely monitor every tender, and each time Gazprom fails to book an auction for additional capacity, Europe’s benchmark gas price rises.
Starting this week, Gazprom has begun lifting gas from Central Russian underground facilities. Consumption is expected to peak in a month.
According to some European Union officials and analysts, Russia is maintaining low supply in order to pressure the EU into approving the Nord Stream 2 gas pipeline. Nord Stream 2 allows Russia to pump gas directly into countries such as Germany without depending on intermediaries such as Ukraine and Belarus. Russia has denied the allegations.
Lying on the bed of the Baltic Sea, the twin Nord Stream 2 pipelines, both running 1,234 kilometers (767 miles), have a total capacity of 55 billion cubic meters.
Western nations consider the new pipeline as leverage on Russia in negotiations related to the troop buildup on the Ukraine border.
Freezing temperatures have disrupted renewable energy production as wind output in Germany registered a dismal 2,277 megawatts on Dec. 21. Based on broker data, German power traded at 420 euros per megawatt-hour.