European gas prices begin climbing again after post-Nord Stream losses
European gas prices are once again climbing following days of falling in the wake of suspected sabotage at the Nord Stream pipelines.
Four major leaks were found along the Nord Stream 1 and 2 pipelines early last week, with both Russian and Western authorities concluding that sabotage was very likely the cause. This prompted a spike in gas prices, as it became apparent that the damaged strings would be unable to provide any gas this winter. The November contract at the Dutch TTF contract soared from €192.8/MWh on September 26 to €223/MWh on September 28.
The contract subsequently eased back to €203.8/MWh on September 29 and €188.8 on September 30, bottoming out at €161.95/MWh on October 4. However, it resurged to €173.6/MWh on October 5 and as of 08:15 GMT on October 6, it is trading at €179.6/MWh.
The EU continues debating what form a gas price cap should take, with 15 member states including Italy and France calling for a EU-wide price cap in a letter to the European Commission in late September. This puts them at odds with Germany, which has said it instead favours a gas price "brake," which would involve governments setting a gas price and then covering the difference to the actual market import price. While this would mean governments bearing the cost, Berlin argues this would ensure that gas supply to Europe is not diverted to markets where prices are higher.
European Commission president Ursula von der Leyen weighed in on October 5, laying out a proposal to limit the price at the TTF hub "in a way that continues to secure the supply of gas to Europe and to all member states." The cap would only serve as a temporary fix, she said, as the EU works on a new gas price benchmark. This new index is needed as TTF prices follow pipeline supply trends, and the market now uses more LNG.
Meanwhile Russia continues to exert pressure on European gas markets, having cut off supply to Italy at the end of last month, ostensibly because of a change in regulation covering transit through Austria. Gazprom said Austria's gas grid operator had refused to confirm transport nominations, but the matter was resolved and supplies to Italy recommenced on October 5.
Since Nord Stream 1's closure and subsequent damage, Italy only gets its Russian gas via Austria. Austria's regulatory authority E-Control said the changes in regulation had been "known to all market actors for months," and that it expected "all to confirm and take necessary measures to fulfil their obligations."
Gazprom has however offered to pump gas to Europe via one of the strings of the Nord Stream 2 pipeline – the only string in the overall Nord Stream system that has not suffered leaks. But first the pipeline would need to be certified as ready to operate – a process that German chancellor Olaf Scholz halted days before Moscow's invasion of Ukraine.