Russian gas to Europe falls short as heat wave boosts demand

FILE PHOTO – Pipes at the onshore facility of the ‘Nord Stream 1’ pipeline are pictured in Lubmin, Germany, March 8, 2022. REUTERS/Hannibal Hanschke

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  • Italy receives 50% less gas than requested on Friday
  • German Uniper receives 60% less gasoline
  • Russia says it must wait and see equipment return
  • Countries need to accumulate storage before winter
  • Italy could invoke gas rationing for some industrial sources

LONDON, June 17 (Reuters) – Russian gas flows to Europe fell short of demand on Friday, coinciding with an early heat wave hitting the south and pushing up benchmark prices already high on concerns the continent may have difficulty accumulating storage in time for winter.

Italy and Slovakia reported receiving less than half of usual volumes through the Nordstream 1 pipeline, which crosses the Baltic Sea from Russia to Germany and accounts for around 40% of Russian pipeline flows to the European Union.

France said it had not received Russian gas from Germany since June 15. read more Germany’s Uniper said it delivered 60% less gas from Russia than agreed, but said it managed to make up the shortfall elsewhere.

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Germany’s energy regulator described the situation as tense, but that German gas supplies were stable for now. see More information

The EU’s reliance on Russian gas and the risk that Moscow will cut supplies in retaliation for economic sanctions imposed after the Ukraine invasion has been a headache for the bloc, prompting it to build up inventories and seek alternative supplies.

An unusually early heat wave in parts of Spain and France heightened concerns, prompting more gas purchases as demand for electricity needed to power air conditioning rose.

Wholesale prices for Dutch gas, the European benchmark, rose and prices for energy supply contracts also rose across Europe.

Italy’s Eni (ENI.MI) said it would receive just half of the 63 million cubic meters per day it had requested from Russia’s Gazprom (GAZP.MM) on Friday, after running a shortfall in the previous two days.

Italian Prime Minister Mario Draghi, who visited Ukraine along with his French and German counterparts on Thursday, accused Moscow of using its gas supplies for political reasons.

But Russia said the pipeline is delivering less gas to Europe because of the slow return of equipment made by Germany’s Siemens Energy (ENR1n.DE) that was sent to Canada for maintenance. Moscow should wait and see how the company and Canada deal with the delay, Deputy Prime Minister Alexander Novak said on Friday. see More information.

Canada previously said it was in talks with Germany to resolve the issue. see More information

HEAT WAVE DEMAND

Italy could declare a gas alert next week if Russia continues to cut supplies, two government sources said, which would mean reducing gas consumption, rationing gas for industrial users and increasing coal-fired power generation.

Across Europe, strong imports of liquefied natural gas have increased storage levels. EU inventories as a whole are at 52% of capacity, just below the five-year average and up from the 43% seen a year ago, analysts at ING Research said.

If Gazprom restarts Nord Stream streams at full capacity, which is considered unlikely, Europe could theoretically fill storage locations to an 80% target by November 1, said Kateryna Filippenko, principal analyst at consultancy Wood Mackenzie.

“But if Nord Stream continues to flow at 45% capacity, or if it stops completely, Europe will only be able to partially replenish storage – to 69% and 60%, respectively,” she said.

“If Gazprom continues to restrict flows, in either case, storage will run out over the winter, unless further demand or supply measures are taken, or Gazprom sends additional gas through available reserved capacity via Ukraine, although we believe this is very unlikely,” he added.

With temperatures rising, Spanish plants bought more gas to generate electricity on Thursday than on any other day since records began, surpassing a milestone set the day before, transmission system operator Enagas said. see More information

Gazprom could increase flows via Ukraine to make up for Nord Stream’s shortfall, but there is still no sign of that happening. In addition, flows through the Yamal-Europe gas pipeline have been flowing eastward for several months instead of the usual westward direction to Germany.

Nord Stream 1 is also scheduled for annual maintenance that will stop all streams between July 11th and 21st.

The United States has been exporting LNG to Europe for months. But an explosion last week at an LNG export terminal in Texas will keep it idle until September and only partially operate from then until the end of 2022. read more

The facility, which accounts for about 20% of US LNG exports, has been a major supplier to European buyers.

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Reuters reports, Nina Chestney in LONDON, Stine Jacobsen in COPENHAGEN, Nora Bull in OSLO, Maria Pia Quaglia in MILAN, Miranda Murray and Maria Sheahan in BERLIN, Isla Binnie in MADRID, Tom Kaeckenhoff in FRANKFURT, Jan Lopatka in Prague; Editing by Tomasz Janowski and Barbara Lewis

Our Standards: The Thomson Reuters Trust Principles.

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