By Geoffrey Smith
Investing.com — European natural gas prices rose again at the open on Thursday, as Gazprom (MCX:) throttled supplies to Germany and Italy in the ongoing economic war between the West and Russia.
By 2:55 AM ET (0655 GMT), the contract for July, which serves as a benchmark for north-west Europe, was up another 11% at 130 euros a megawatt-hour, extending gains over 20% on Wednesday. It has risen more than 50% this week as the Russian export monopoly has cut supplies through the Nord Stream 1 pipeline by 60%, blaming the delayed return of compressor station equipment after routine maintenance by its German maker, Siemens (NS:).
German Vice-Chancellor Robert Habeck described the move on Wednesday as “politically motivated” and a ploy to squeeze prices higher.
Gazprom’s move came hard on the heels of a German government decision earlier in the week to assume indefinite control of Gazprom’s main unit in Germany. Berlin announced on Tuesday that it would lend over 10 billion euros ($10.5 billion) to the newly renamed company, chiefly in order to fund purchases from alternative sources to secure supplies.
Securing Energy for Europe GmbH, as Gazprom Germania has been renamed, will have chief responsibility, ensuring that Germany meets an EU target of making sure that gas storage facilities are at least 80% full by the start of the winter heating season. As of June 14, the overall European storage level was making solid progress toward that goal, standing at 52% of capacity. That’s up from 25% at the end of the last quarter. Analysts argue that if Europe continues to fill its storage at the current rate, it will weaken Russia’s leverage over Europe when winter comes.
German Chancellor Olaf Scholz is due to visit Ukrainian President Volodymyr Zelenskyy on Thursday alongside French President Emmanuel Macron and Italian Prime Minister Mario Draghi. Scholz, in particular, has been heavily criticized by Zelensky for failing to provide Ukraine with military equipment to defend itself against Russia’s invasion.
The Italian news agency ANSA meanwhile reported that Gazprom has also cut supplies to Italy by 15% as of Thursday.
“Gazprom has referred to a limited reduction in gas supplies for Wednesday, amounting to around 15%. The reasons for the decrease have not been notified at the moment,” reported an Italian gas executive as saying. Like Germany, Italy is trying to source more supplies from other sources. However, its biggest alternative provider, Libya, is still disrupted by a decade-long power struggle since the fall of Muammar Gaddafi.