European wholesale gas prices rise as pipeline from Russia stays in reverse flow

The price of wholesale gas on one benchmark contract rose as much as 8% as the reverse flows from Germany to Poland on the Yamal-Europe pipeline continued to cause concerns.

European gas prices rose on Wednesday as gas flowed eastwards for the 16th successive day along a pipeline that usually sends deliveries from Russia to Europe and political tensions remained high.

The price of wholesale gas on one benchmark contract rose as much as 8% as the reverse flows from Germany to Poland on the Yamal-Europe pipeline continued to cause concerns, a day after European prices soared over concerns about low supplies from Russia as colder weather approaches.

Russian energy exports are also in focus because of a broader standoff between Russia and the West, including over a Russian troop buildup near neighbouring Ukraine, which is trying to forge closer ties with Nato. 

"There is growing nervousness on the European gas market again... This is chiefly due to faltering pipeline deliveries via Ukraine from Russia" Commerzbank analyst Barbara Lambrecht said in a research note.

"The situation on the European gas market also remains fraught in view of the political tensions, especially as higher demand for LNG (liquefied natural gas) from Asia is feared again."

She was referring to an additional factor that is worrying traders — a warning by Indonesia that its coal supply situation is critical after it announced a ban on exports this month to avoid outages at domestic generators.

Leverage

Some MEPs have accused Russia, which supplies around a third of Europe's gas, of using the crisis as leverage. They say Moscow has restricted gas flows to secure approval to start up the newly built Nord Stream 2 pipeline, which will supply gas to Germany.

Russia has denied the allegations and says the pipeline will boost gas exports and help alleviate high prices in Europe. It has said it is meeting its contractual obligations on gas deliveries.

Moscow also denies US assertions that it is planning an invasion of Ukraine, which it accuses of building up forces in the east of the country.

Europe has been at the heart of an energy crisis since last year, when the lifting of Covid-19 restrictions put huge demands on depleted stocks of natural gas.

• Reuters