European benchmark gas prices soared higher today after Gazprom cut the volumes of gas it transports via the Nord Stream 1 pipeline further on Wednesday, gaining 8 percent in morning trade, Bloomberg reported.
Gazprom cut Nord Stream 1 volumes by 40 percent earlier this week, citing the delayed delivery of gas turbines it had sent to German Siemens for scheduled repairs.
Siemens, for its part, said that it had sent the turbines to be repaired at a Canadian factory, but new anti-Russian sanctions imposed by the federal Canadian government had stalled the return of the equipment.
"Due to the sanctions imposed by Canada, it is currently impossible for Siemens Energy to deliver overhauled gas turbines to the customer," Siemens Energy said, as quoted by the Financial Times. "We have informed the Canadian and German governments and are working on a viable solution."
Germany's Economy Minister Robert Habeck, however, said the reduction of gas flows via the Nord Stream 1 pipeline was a political decision.
"Russia's reason [for reducing gas supplies] is just a pretext," Habeck said. "Their strategy is obviously to unsettle [people] and drive up prices."
On Wednesday, Gazprom further reduced Nord Stream 1 volumes to a total of 60 percent and also cut supplies to Italy by 15 percent, which pushed European gas prices further up.
"Today's developments are going to be a massive shock for gas prices as Europe is now going to struggle to refill its storages ahead of next winter if this reduction is for an extended period of time," ICIS analyst Tom Marzec-Manser told the FT on Wednesday.
According to Bloomberg, Russian gas flows to its biggest European clients since the start of this month have fallen to the lowest since 2014. U.S. LNG supplies have meanwhile become problematic after an explosion at Freeport LNG prompted production suspension that will last for a minimum of three months, with a full return to normal operation coming no sooner than late 2022, according to the company.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. More
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