European Natural Gas Prices Soar 17% After Russia Says It Will Slash Supplies

By Markets Insider

European natural gas prices have shot 17% higher over the last two days after Russia said it will slash supplies of the fossil fuel to the continent through the Nord Stream 1 pipeline.

Dutch TTF natural gas futures for August — the benchmark European price — rose sharply on Monday after Russia's Gazprom announced the move.

It jumped again on Tuesday to around 188 euros [$191.50] per megawatt hour, according to data from the ICE exchange. That was more than 17% above Friday's closing price of around 160 euros and the highest since early March.

European natural gas prices have now risen for four consecutive days and were up more than 700% from a year earlier on Tuesday.

The cuts to supplies and the jump in prices are driving fears that Europe could soon tumble into a recession, as high energy prices cause people and businesses to slash spending.

Economists at Credit Suisse on Tuesday slashed their growth predictions for the eurozone, saying they now expect the bloc's gross domestic product to shrink in 2023.

The bank's economists, led by Veronika Roharova, said they expect "the largest contractions in Germany and Italy – i.e. countries with large manufacturing sectors that are highly reliant on Russian gas."

State-owned Russian energy company Gazprom said on Monday it would cut natural gas flows through Nord Stream 1 to 20% of capacity on Wednesday, having already slashed shipments to 40% of normal amounts.

Gazprom has blamed sanctions for stymieing the supply of crucial turbines and said it needs to carry out maintenance work. However, European leaders have accused Russia of using natural gas as a political weapon.

US shipments of super-cooled liquefied natural gas to Europe have soared this year, as consumers in the region have scrambled to snap up alternative sources of supply. The United States became the world's biggest exporter of LNG in the first half of 2022, according to the Energy Information Administration.