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Saudi investment funds see steepest drop in 16 years

Saudi investment funds see steepest drop in 16 years

LONDON: European gas buyers already struggling with record prices face further difficulties when markets reopen on Monday after Russia announced that one of its main supply pipelines to Europe would remain closed indefinitely, raising fears about energy rationing.

Falling gas flows from Russia before and after its invasion of Ukraine in February has already driven European prices up nearly 400% in the past year, sending gas costs skyrocketing. electricity.

Europe has accused Russia of militarizing energy supplies in what Moscow has called an “economic war” with the West over fallout from the Ukraine conflict, while Moscow blames Western sanctions and technical issues for power outages. supply.

The Nord Stream gas pipeline, which runs under the Baltic Sea to Germany, historically supplied around a third of the gas exported from Russia to Europe, but was already operating at just 20% capacity before flows were halted last week last for maintenance.

Expectations were high. State-controlled Russian energy giant Gazprom would restart flows at 20% after the latest shutdown, causing Dutch TTF gas benchmark prices to fall about 40% from the August 26 record to close. to just over €200 per MWh on Friday. .

But after Russia scrapped the deadline for resuming flows on Saturday, saying it had discovered a fault during maintenance, prices are set to rise again, analysts said.

“On Friday … the market was already pricing in the return of Nord Stream 1 (NS1) flows,” said Leon Izbicki, gas analyst at Energy Aspects. “We expect a significantly stronger opening for the TTF on Monday.”

Skyrocketing electricity costs linked to soaring gas prices have already forced some energy-intensive industries, including fertilizer and aluminum makers, to cut production, and led EU governments to inject billions in household assistance programs.

The impact of the latest cut will depend on Europe’s ability to attract gas from other sources, said Jacob Mandel, senior commodity partner at Aurora Energy Research.

“Supply is hard to come by, and it’s getting harder and harder to replace every bit of gas that doesn’t come from Russia,” he said.

Following Russia’s invasion of Ukraine, Europe quickly launched plans to reduce its dependence on Russian fuels, switching to alternative suppliers of gas and other fuels and accelerating the deployment of clean energy supplies.

Germany has started developing liquefied natural gas terminals to enable it to receive gas from global suppliers and move away from Russian gas imports.

“There are a lot of possibilities to replace this (Russian) gas with LNG imports at the moment, but when the weather gets colder and demand starts to pick up in winter in Europe and Asia, there is no only a limited amount of LNG that Europe can import,” Mandel said.

Klaus Mueller, chairman of the Federal Grid Agency energy regulator, said in August that even if German gas reserves were 100% full, they would be empty in 2.5 months if Russian gas flows were completely interrupted.

Last week, Europe hit an early target of filling its gas stocks 80% by November. EU stocks are currently 81% full, according to data from Gas Infrastructure Europe, with German stores 85% full.

Izbicki said prices should reach an average of €400 per MWh between September 2022 and the end of October 2023 to encourage enough sellers to send gas to storage for the EU to meet its targets for next year before winter. 2023.

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