European gas prices surge to six-month peak

By Al Mayadeen English
Source: Agencies
16 Aug 2022 19:06

Europe braces itself for blackouts and cold winter as gas prices hit a new peak.

European gas prices surge to a six-month peak.

European gas prices hit a six-month high on Tuesday, compounding recession fears as the area faces rationing due to Russian supply disruptions caused by the war in Ukraine.

Meanwhile, oil prices continued losses a day after falling more than 5% on expectations that demand may fall owing to recessions or poor growth in big economies, such as China.

In Europe, the Dutch TTF natural gas reference price rose more than 10% at one time to more than 250 euros per megawatt hour, the highest level since the beginning of March, not long after the war in Ukraine.

"Energy prices are soaring in Europe," said market analyst Fawad Razaqzada at City Index and FOREX.com.

"Reduced Russian energy shipments of around only 20 percent of capacity through the Nord Stream 1 pipeline have increased the risk of rationing in the coming months," he added.

Rising gas prices would almost surely plunge European economies into recession, cutting demand for other commodities, such as oil.

"A slick of worry is growing about the darkening prospects for global growth as economies slow around the world, pushing down oil prices in expectation of lower demand," noted Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

Signs that Iran is nearing a nuclear deal added to the downward pressure on prices, with an agreement expected to allow the country to resume global oil supplies.

Analysts believe Tehran would deliver 2.5 million barrels per day, delivering a much-needed boost to supplies that have been impacted by sanctions imposed on Russia.

Libya has also raised output, prompting prices to slump to six-month lows and erasing gains gained before the Ukraine conflict. Analysts, however, warned that, given the upcoming US elections, an agreement with Iran could still be a long way off.

"A deal with Iran would likely not be popular with US voters and so is hard to envisage before the November mid-terms," said National Australia Bank's Ray Attrill.

"Markets are currently prone to optimism, though, and hopes for a deal... have added to downward pressure on oil prices."