Zero Hedge on European gas supplies

Zero Hedge on European gas supplies

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In Dramatic Escalation, European Nat Gas Prices Soar After Gazprom Warns Ukraine Flows At Risk

In a day of constant news surrounding European gas flows, including the potential sabotage of the Nord Stream pipeline, moments ago, Russia state-owned gas giant Gazprom PJSC warned that another major source of gas flows to Europe was at risk, just hours after three massive gas pipelines were hit by suspected sabotage.

As Bloomberg reports, in a dramatic escalation of the energy standoff between Russia and Europe in little over 24 hours, the Nord Stream pipeline was knocked out by what German officials said looked like sabotage. Gazprom then said that one of two remaining routes bringing gas to Europe – via Ukraine – was at risk because of a legal spat.

Specifically, as Reuters notes, Gazprom rejected all claims from Ukraine’s energy firm Naftogaz in arbitration proceedings over Russian gas transit, and had notified the arbitration court. It also said that Russia may introduce sanctions against Naftogaz in case it further pursues the arbitration case, meaning Gazprom would be prohibited by the sanctions from paying Ukraine the transit fees.

Naftogaz had initiated a new arbitration proceeding against Gazprom earlier this month, saying the Russian company did not pay for the rendered service of gas transportation through Ukraine. The company had said “funds were not paid by Gazprom, neither on time nor in full” for the gas transit.

Gazprom said on Tuesday that Naftogaz had no “appropriate reasons” to reject its obligations on transit via the Sokhranovka point, a key route for Russian gas exports to Europe.

In May, Ukraine suspended the flow of gas through Sokhranovka, which it said delivers almost a third of the fuel piped from Russia to Europe through Ukraine, blaming Moscow for the move and saying it would move the flows elsewhere.

Following the report that Russia may soon halt natgas transit via Ukraine, gas prices quickly jumped almost 20% as traders factored in the prospect that Europe will have to live without Russian gas this winter – and beyond.

Gazprom said that a legal dispute risks prompting Moscow to sanction Ukraine’s Naftogaz. If that happened, then Gazprom would be unable to pay transit fees, the company said on Telegram, putting at risk flows.

“In practice, this will mean a ban on Gazprom from fulfilling obligations to sanctioned bodies under completed transactions, including financial transactions,” the company said.

If, or rather when, supplies through Ukraine are shut down, it would leave Gazprom sending gas only via the TurkStream pipeline to Turkey and a handful of European countries that haven’t severed business ties with Russia.

Oil Surges After Russia Proposes 1 Million Barrel OPEC+ Output Cut

Yesterday, as oil prices were tumbling to fresh 2022 lows despite a major hot war taking place and collapsing energy CapEx which virtually assures a crippling energy crisis in the next 5-10 years, we asked if OPEC+ would “wait until tomorrow to drop the output hammer or will they go today.”

Well, they waited until tomorrow, because moments ago Reuters reported that following recent media reports that Saudi Arabia and Russia would likely cut output if Brent drops below $90, OPEC+ dropped the trial balloon of what comes next:

  • RUSSIA WILL LIKELY PROPOSE OPEC+ REDUCES OUTPUT BY AROUND 1 MLN BPD AT NEXT MEETING – SOURCE FAMILIAR WITH RUSSIAN THINKING

As Oilprice adds, the news comes just a day after comments made at Monday’s APPEC’s oil conference that suggested global oil stocks are set to rise next year amid weak demand and a strong dollar—and that OPEC would have to cut output if they wanted to keep prices from falling further.

OPEC would have to make oil cuts between 500,000 and 1 million bpd to keep Brent above $90 per barrel, Gary Ross, chief executive of Black Gold Investors, said at the meeting on Monday.

Now Russia itself could recommend a million bpd cut—and as one of the two largest members of the OPEC+ group, the county’s recommendations hold weight.

The next OPEC+ meeting will be held on October 5, which will determine the output targets for November. It is also in November when the current batch of U.S. SPR releases, which have helped to prop up low oil inventories, will cease.

OPEC+ cut production targets for October by 100,000 bpd at the previous meeting, demonstrating its willingness—to respond to the changing oil markets in an expeditious manner.

And since most other OPEC+ sources will agree with Russia, oil has spiked with WTI surging more than 3% from $77.8 to just shy of $80.

And while Biden is still draining the SPR at an accelerated pace to minimize the Democrat rout in November, oil will likely fluctuate for the next two months at which point it will explode higher as the new post-SPR drain reality finally kicks in.

CIA Warned Germany Of Possible Nord Stream Pipeline Attack

Update (1910ET): 

European Commission chief Ursula von der Leyen confirmed the Nord Stream pipeline system leaks were caused by “sabotage,” threatening the “strongest possible response” should European energy infrastructure be attacked. 

Earlier, Danish Prime Minister Mette Frederiksen described the leaks on NS1 and NS2 as “deliberate acts,” adding: “We are not talking about an accident.”

And then there’s this from former Polish Defense Minister Radek Sikorski…

* * * 

Update (1445ET): 

 

German magazine Spiegel said the US Central Intelligence Agency (CIA) recently warned Berlin about the increasing signs of a possible planned attack on the Nord Stream pipeline system. 

Spiegel reported, citing unnamed sources, that the CIA tipped off Berlin in the summer about possible attacks on NS1 and NS2. 

* * * 

Update (1415 ET): 

Prime Minister of Denmark Mette Frederiksen told reporters Nord Stream pipeline system damage to NS1 and NS2 “are deliberate actions, not an accident.”  

“It is now the clear assessment by authorities that these are deliberate actions. It was not an accident.

“There is no information yet to indicate who may be behind this action, Frederiksen said, adding that authorities don’t see NS1 and NS2 damage as a military threat against Denmark. 

* * * 

Update (1215ET):

CNN’s White House and national security reporter Natasha Bertrand said the Biden administration “is not going to speculate on the cause” of the Nord Stream pipeline system damage to NS1 and NS2. 

“The US stands ready to support European partners’ efforts as they investigate,” Bertrand said. 

Another CNN national security reporter, Kylie Atwood, tweeted that US Secretary of State Antony Blinken said it would be “in no one’s interest” if NS leaks were confirmed as the result of an attack or sabotage.

Remember what Undersecretary of State for Political Affairs Victoria Nuland said earlier this year… 

* * * 

Update (1025ET):

AFP News reported the US is ‘ready to provide support’ to Europe after the Nord Stream pipeline system leaks. 

There was no further information on what type of support, but one can only imagine it would involve increased LNG cargo shipments to the EU.  

There’s only one issue… 

* * * 

Update (0932ET): 

Swedish broadcaster SVT reported that the Swedish National Seismic Network detected two underwater explosions near the Nord Stream pipeline system on Monday. 

“One of the explosions had a magnitude of 2.3, and was registered at as many as 30 measuring stations in southern Sweden,” SVT said. 

Bjorn Lund, a professor in seismology and director of the Swedish National Seismic Network, said these two seismic events were explosions.  

Here’s a map of the three leaks on the Nord Stream pipeline system. 

Bloomberg’s Javier Blas said the size of the “gas leak is huge.” 

So the question remains what (or who) caused the blasts? 

Remember what President Biden said weeks before Russia invaded Ukraine:  

 “If Russia invades…then there will be no longer a Nord Stream 2. We will bring an end to it.”

* * * 

Update (0920ET):

Swedish daily newspaper Aftonbaldet quoted the Swedish Defense Force’s chief of operations, Michael Claesson, who said it’s not ruled out that there’s a connection to the gas leaks and Russia’s mobilization last week. 

Claesson then told the paper that the incident was a “military matter.” 

* * * 

Update (0910ET): 

Danish Defense Forces published the first images of the gas leaks from the Nord Stream pipeline system near the exclusive economic zone southeast of Bornholm island, according to the Swedish daily newspaper Aftonbaldet. 

The first images show a large surface area of gas bubbles in the Baltic Sea. 

Here are more images of one of the leaks. 

Another leak was reported by the Danish Defense Forces to be 1 kilometer in diameter on the surface water. 

This is an absolutely massive leak. 

A handful of EU officials suspect the pipelines were sabotaged.  

* * * 

Update (0842ET):

Sweden’s government held a crisis management meeting with other public authorities over the damage to the Nord Stream pipeline system, Swedish daily newspaper Aftonbaldet said, citing comments from Foreign Minister Ann Linde. 

Linde said Sweden may discuss the pipeline damage with Denmark later today.  

Denmark is tightening security around all energy assets as some European officials speculate the NS pipeline system was sabotaged. 

* * * 

The plot thickens about what caused damage to three lines of the Nord Stream gas-pipeline system under the Baltic Sea to Europe as some European officials now suspect sabotage.

Nord Stream AG, the operator of the NS pipeline system, published a statement Tuesday that read, “the destruction that happened within one day at three lines of the Nord Stream pipeline system is unprecedented … and impossible now to estimate the timeframe for restoring operations of the gas shipment infrastructure.” 

On Monday, NS2 gas pipeline and two NS1 lines reported rapid pressure drops, with gas leaks reported by Swedish and Danish authorities in the Baltic Sea near the exclusive economic zone southeast of Bornholm island. 

A more in-depth view of the incident area. 

Pressure drops in the NS gas-pipeline system could be the biggest signal that flows via NS1 might not resume this winter. Germany and surrounding countries are investigating the incident. NS2 cannot impact flows to the EU because the controversial idled conduit was never operational after German Chancellor Olaf Scholz canceled it after Russia invaded Ukraine earlier this year.

Klaus Mueller, the president of the German energy network regulator, tweeted that the market situation remains “tense,” but Germany and the EU are no longer dependent on NS supplies. 

Nord Stream AG issued an outage message that is active until Oct. 26, while the German economy ministry said it’s investigating the incident. 

Dutch front-month gas, the European benchmark, was up nearly 10% at 190.50 euros per megawatt-hour on Tuesday morning. 

The simultaneous pressure drop of the NS lines suggests some market participants may watch for any indication of sabotage. 

 

Denmark’s Prime Minister Mette Frederiksen said it was hard to imagine NS gas leaks were caused by a “coincidence.” 

Frederiksen didn’t rule out sabotage, though she said it was too early to draw any conclusions, according to Reuters, quoting public broadcaster DR during a visit to Poland. 

A German security official told Bloomberg that NS damage appears to be the result of “sabotage.”

The evidence points to a violent act, rather than a technical issue, according to a German security official, who asked not to be identified because the matter is being probed. -Bloomberg 

German daily newspaper Tagesspiegel reported that “the Nord Stream pipelines may have been damaged by targeted attacks and leaked as a result.”

A source close to the government, quoted in the newspaper, said, “everything speaks against a coincidence.”

“We cannot imagine a scenario that is not a targeted attack,” the source said.

Die Welt, another German newspaper, reported the timing of the NS damage may suggest sabotage and was unlikely to be an accident. 

Reporters asked Kremlin spokesman Dmitry Peskov if the NS system’s pressure drop could be due to sabotage. He responded: “It is impossible to exclude any options.”

There appears to be no immediate end to the gas leak from NS pipelines, according to the Danish national daily newspaper Berlingske, which quoted Danish Energy Authority. 

The energy authority said, “a lot of gas is coming out, so it is not a small crack, it’s a really big hole. Nord Stream leaks can be a deliberate act, but it can also be something else, it’s just extremely rare that something like this happens.”

*Developing…  

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One thought on “Zero Hedge on European gas supplies”

  1. The Nordstream pipelines were destroyed by the US.
    By doing this, they removed a major negotiating chip from Russia regarding making deals outside NATO and the EU with individual countries who would like to purchase gas or oil from them (Russia) regardless of sanctions. When will europe wake up and realize that the US does not care if they freeze to death, as long as the official Narrative continues on?

    Reply

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