(Bloomberg) -- European gas surged to the highest level in a month, fueling wider inflation concerns, as delays to a controversial new pipeline from Russia stoked fears of a supply shortage with winter setting in.
Prices climbed as much as 8.1%, extending Tuesday’s 18% surge, after Germany’s energy regulator suspended the certification process for the Nord Stream 2 link until it creates a local subsidiary for the section of the pipeline in the country. That has raised concerns that Europe won’t be able to get the supplies it needs in the coming months.
Russian state-run exporter Gazprom PJSC will meet its contractual obligations, but any extra shipments on existing routes will depend on requests from European clients and the company’s “readiness” to fulfill them, Kremlin spokesman Dmitry Peskov said Wednesday. He added that the operator of Nord Stream 2 is ready to meet all the regulatory requirements to get gas flowing through the pipeline “as soon as possible.”
With temperature forecast to drop over the next two weeks, consumers in Europe are facing high energy bills. Surging costs pushed euro-zone inflation to a 13-year high in October, stirring fears about an economic slowdown. Inflation also spiked in the U.K.
Dutch month-ahead gas rose to a high of 101.82 euros a megawatt-hour, the highest for a most-active contract since Oct. 18, and were up 6% as of 11:53 a.m. in Amsterdam. The U.K. equivalent added 4.8% to 251.50 pence a therm.
Spot liquefied natural gas prices in Asia are also surging amid a shortage of ships, meaning less fuel potentially available for Europe.
The delay in starting up Nord Stream 2 is “bullish for the balance of winter,” said Julien Hoarau, head of consultant Engie EnergyScan. It also adds support to prices for next summer, “given concerns over low stock levels at the end of the winter period and consequently strong injection demand expectations,” he said.
EUROPE GAS OUTAGES: U.K.-Belgium Pipeline Shut for Maintenance
Gas shipments from Russia have recovered after a slump at the start of November but are still low compared with last year. The nation has signaled it has little appetite for boosting volumes that transit through other territories into Europe, noting that the start of Nord Stream 2 would ease the continent’s energy crunch.
Supplies may increase in the first quarter, even if the new pipeline is not yet operational, as many Gazprom’s clients would have the flexibility to call for higher flows from January, analysts at Goldman Sachs Group Inc. said in a note. Yet, the longer the shortfall of Russian flows into Northwest Europe lasts, the more the market “will have to rely on high gas prices to generate enough demand destruction to help balance inventories through the winter,” they said.
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