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Natural gas prices surge higher in Europe as Russia withholds key supplies

January 5, 2022 | BPR Wire |

The price of natural gas skyrocketed more than 30% in Europe on Tuesday after Russia continued to withhold key supplies with winter weather approaching.

While the price, measured by the Dutch natural gas index, fell after its early spike, it remained about 20% higher at around midday Tuesday, Reuters reported. In December, Russian state-owned gas provider Gazprom slowed gas flows transported through the Yamal-Europe pipeline to Germany and reversed the flows’ direction from westward to eastward.

Tuesday marked the 15th consecutive day the pipeline’s natural gas flowed from Europe back toward Russia, according to Reuters. While the pipeline is responsible for just 10% of the region’s supplies, the reversal has sent the price of gas to record highs.

“European gas prices have rebounded, supported by the additional drop in Russian flows,” market analysts at the research firm Engie Energyscan said, according to Reuters.

The Russian government has denied interference in the pipeline’s operations, saying the flow reversal was a commercial matter. Russian President Vladimir Putin also placed some blame on Germany, saying that it was reselling the gas it received from Russia to Poland and Ukraine, Reuters reported.

Gazprom told the Daily Caller News Foundation in mid-December that it was supplying gas to customers in full compliance with its contractual obligations.

“Europe has very little storage buffer this winter and Europe’s balance is therefore a lot more dependent on imports than in previous years,” James Waddell, head of European gas at Energy Aspects, previously told Reuters.

“Additionally, Gazprom has traditionally shipped around 20% of its supply to Europe through Poland, but these flows have been inconsistent this year and driving up uncertainty about how much gas Europe will actually receive from Russia,” Waddell said.

Meanwhile, the German government announced plans to shutter three of its remaining nuclear power plants, calling the energy source “dangerous.” The move will force the nation, which is the European Union’s largest economy, to rely more heavily on natural gas from Russia in the near term.