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No Stream: EU gas markets brace for price surge after latest Russia gas cut

By Susanna Twidale

LONDON (Reuters) -European gas buyers already grappling with record-high prices face further pain once the markets open on Monday after Russia said among its main supply pipelines to Europe would remain shut indefinitely, sparking fears over energy rationing.

Lower gas flows from Russia before and after its February invasion of Ukraine have previously pushed up European prices by nearly 400% in the last year, sending electricity costs soaring.

Europe has accused Russia of weaponising energy supplies in what Moscow has named an economic war with the West on the fallout from the Ukraine conflict, while Moscow blames Western sanctions and technical issues for supply disruptions.

The Nord Stream pipeline, which runs beneath the Baltic Sea to Germany, historically supplied around a third of the gas exported from Russia to Europe, but had been running at only 20% of capacity before flows were halted the other day for maintenance.

Expectations were high Russias state-controlled energy giant Gazprom would restart flows at 20% following the latest stoppage, leading benchmark Dutch TTF gas prices to fall back around 40% from Aug. 26s record high to close at only over 200 euros per megawatt hour on Friday.

But after Russia scrapped a Saturday deadline for flows to resume, saying it had discovered a fault during maintenance, prices will probably surge again, analysts said.

On Friday the marketplace had been pricing in Nord Stream 1 (NS1) flows returning, Energy Aspects gas analyst Leon Izbickisaid. We expect a significantly stronger open for the TTF on Monday.

Sky-high power costs associated with surging gas prices have previously forced some energy-hungry industries, including fertiliser and aluminium makers, to cut back production, and led EU governments to pump billions into schemes to greatly help households.

The impact of the most recent cut is based on Europes capability to attract gas from other sources, Jacob Mandel, senior associate for commodities at Aurora Energy Research, said.

Supply is tricky to find, also it becomes harder and harder to displace just of gas that doesnt result from Russia, he said.

Total halt

German Chancellor Olaf Scholz said on Sunday his country have been preparing for a complete halt in gas deliveries from Germany.

Germany, Europes largest consumer of gas, reaches phase two of a three-stage emergency intend to cope with lower supply. A proceed to stage three would see some gas rationing to industry.

Following Russias invasion of Ukraine Europe rapidly launched plans to cut its reliance on Russian fuels, switching to alternative suppliers of gas along with other fuels and pushing faster deployment of clean energy supplies.

Germany has begun developing liquefied gas (LNG) terminals make it possible for it to get gas from global suppliers and move from Russian gas imports.

Theres a lot of scope to displace that (Russian) gas with LNG imports for the present time, but when the elements turns cold and demand starts to get in the wintertime in Europe and Asia, theres only so much LNG on the market that Europe can import, Mandel said.

Klaus Mueller, president of the Federal Network Agency energy regulator, said in August that even though Germanys gas stores were 100% full, they might be empty in 2.5 months if Russian gas flows were halted completely.

Europe the other day met early a target to fill its gas stocks by 80% by November. EU stocks are 81% full, in accordance with Gas Infrastructure Europe data, with Germanys stores at 85% full.

Izbicki said prices would have to reach typically 400 euros per MWh between September 2022 and end-October 2023 to encourage enough sellers to send gas to storage for the EU to meet up its targets for next coming year of winter 2023.

Russian gas continues to be currently flowing to Europe through pipelines via Ukraine, but speculation is currently mounting over whether that too could possibly be halted.

Were shifting focus to the (gas) that continues to flow to Europe through Ukraine, James Huckstepp, EMEA gas analyst at S&P Global Platts, said in a Twitter post. Just a matter of time

(Reporting by Susanna Twidale; Editing by Jan Harvey)

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