European gas prices jump to record highs amid drop in deliveries from Russia

Natural gas prices spiked in Europe on Friday after an accident at the Gazprom plant in Russia forced the company to cut its supply to European underground storage facilities.

The cost of September futures on the TTF hub in the Netherlands jumped to $546.3 per 1,000 cubic meters by 8:30am GMT, according to Intercontinental Exchange data.

The price hike follows a temporary decrease in gas deliveries from Russia through the Yamal-Europe gas pipeline due to a fire that broke out at Russian energy giant Gazprom’s Urengoy plant in Siberia. The fire was extinguished on August 5, but the volume of gas transferred from the facility has not yet been fully restored, with work on the site halted amid investigation procedures.

Following the accident, Russia’s domestic exchange territorial index of liquefied petroleum gases (LPG), used as motor and domestic fuel, also jumped by 3.2%, renewing a historical maximum for the fourth time in a week, data from the St. Petersburg International Commodity Exchange (SPIMEX) showed.

Meanwhile, Russia is preparing to increase its gas deliveries to the European market via the Nord Stream 2 pipeline, which is due to be finished later this month. Looking ahead to the pipeline’s commission, Gazprom abstained from booking additional capacity volumes for the pipeline going through Ukrainian territory for four consecutive months.

However, the European market is left severely short-supplied for now, due to increased demand amid post-pandemic recovery and a drop in deliveries from its key supply source, Norway’s Troll gas field, due to unplanned outages.

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