European natural gas prices have reached a record high as Russia constrains its fuel supply to the continent.
Gas futures rose as much as 11% as Russian gas was flowing eastward from Germany to Poland, according to network operator Gascade. The change in flows likely reflects lower orders from German buyers due to the holiday season.
Lower supplies into Germany will force Europe to keep withdrawing gas at high rates from its already depleted storages. As freezing temperatures spread across the continent, more gas will be needed to keep the lights on as Europe’s network of renewable sources can’t fill the gap.
Analysts expect European gas stockpiles to end the year at a record low, potentially extending Europe’s energy crunch into next winter, a headache for policy makers already contending with rising inflation.
Benchmark European gas prices traded in the Netherlands surged to an all-time high of $162.78 Euros a megawatt-hour. Futures were up 9.4% at $160.75 Euros in Amsterdam.
Russian gas flows into the Mallnow compressor station, where the Yamal-Europe pipeline ends, dropped to zero and the link was instead flowing eastward to Poland in recent days.
Limited supplies have forced Europe to rely on its depleted gas storages and burn more coal, the dirtiest of fossil fuels, to keep the lights and heat on.
Freezing weather this week is also sending short-term power prices surging as renewables can’t keep up with demand. German wind output plunged as low as 2,277 megawatts, the lowest level since November 16.
However, there’s some relief in sight for Europe as the cold weather is not forecast to last much longer.
