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EU gas stores rise despite price volatility

The overall gas situation in Europe is still largely stable with the continent’s gas stores up to 77.5% as of July 1, nearly 20% higher than this time last year. However, gas prices are trending upwards once again with the TTF neutral gas price index rising by as much as 30% in June with prices reaching a high of €41.70/MWh during the middle of the month. 

Rising gas prices in June appear to have been caused by a series of production outages at three Norwegian gas facilities operated by Equinor ASA and AS Norske Shell that decreased the country’s energy exports to Europe by around 1.4 bcm.  

Norwegian gas exports saw improvements over the course of June as Equinor’s Hammerfest LNG plant came back online following a compressor failure that forced the facility to shut down from May 5 until June 14. The company resumed production at its Statfjord A oil and gas platform following a gas leakage that impacted production from May 25 until early June. Gas exports from Norway continue to remain below capacity as maintenance work at Norske Shell’s Nyhamna gas processing plant has been prolonged until July 15.  

In addition to curtailed gas flows from Norway, energy markets were unsettled by the Wagner Group’s failed rebellion against the Russian authorities during the weekend of June 24, with front-month gas rising 13% during the morning of June 26.   

On the policy front, the EU continues to impose measures to decrease the bloc’s reliance on Russian energy imports. For example, the EU’s latest sanctions package has prohibited the resumption of oil flows between Russia, Germany, and Poland along the Druzhba pipeline. The sanctions also tightened vessel rules to prevent ship-to-ship transfers of Russian oil and petroleum products.  

Ongoing efforts to revamp the bloc’s electricity market to prevent a repeat of last year’s spike in energy prices have slowed due to disagreements regarding subsidies for alternate energy sources. A meeting between EU energy ministers on June 19 failed to produce a new set of rules for the continent’s power market after Austria, Belgium, Germany, and Luxembourg objected to a measure that would make it easier for Eastern European nations including Poland to prolong coal subsidies. Negotiations could also face further delays due to an ongoing disagreement between France and Germany over whether French nuclear plants will be able to qualify for subsidies under a new renewable energy framework.  

Gas stores continue to rise 

The EU remains well on track to achieve its 90% storage target for the 2023-24 winter season. The rapid increase in the continent’s overall gas storage levels has prompted the EU to consider expanding the continent’s gas capacity by utilizing gas storage facilities in Ukraine.  

Ukraine continues to possess one of Europe’s largest gas storage facilities despite the ongoing conflict with Russia, and a gas storage deal would potentially allow the EU to increase gas storage levels. However, a deal with Ukraine could prompt increased Russian attacks on Ukrainian energy infrastructure and doubts remain over whether public institutions would be willing to provide insurance coverage for gas stored in the country.   

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