(Bloomberg) -- European governments and gas traders are counting down to Thursday morning to see if Russia’s biggest pipeline to the continent will restart after maintenance.
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President Vladimir Putin signaled late Tuesday that exports via the Nord Stream gas link will resume at lower rates -- and with conditions. Orders for gas shipments now indicate flows will return at 40% of capacity, slightly higher than previously expected.
Still, orders aren’t a guarantee of deliveries and traders will only know for sure after 6 a.m. Berlin time on Thursday, when the pipeline’s 10-day maintenance period ends.
Moscow has been curbing gas shipments to Europe for months, but the continent still relies on the little it’s getting to fill the retired salt caverns, aquifers and fuel depots that hold its fuel inventories. Without Russian gas, Europe is unlikely to have enough supply to warm homes and keep the lights on throughout the winter. The risk is massive economic damage.
Policy makers are preparing for the worst, with the European Union on Wednesday unveiling a plan to try to curb gas consumption by 15%. Budget Commissioner Johannes Hahn even said he didn’t expect the pipeline to come back, but analysts now think Russia has more leverage if it keeps Europe guessing.
“Sending flows, but at capped levels, runs in Russia’s favor,” Tim Partridge, head of energy trading at DB Group Europe, said in a report on Wednesday. “It allows the Kremlin to continue to use the pipeline as a way of increasing volatility, while still reaping immense profits on inflated energy prices.”
Read: How Nord Stream Became So Important in Europe’s Gas War
European gas prices have surged over the past year, climbing to a record shortly after Russia invaded Ukraine. While prices have eased since then, they are still nine times higher than the average of the past five years, boosting costs for consumers already contending with higher prices of everything from food to fuel.
Concerns about gas shortages have already spread to every market, knocking the euro to trade around parity with the dollar. A complete shutdown of Russian supplies will put Germany, Europe’s biggest economy, at the risk of losing almost 5% of its economic output, the International Monetary Fund warned.
Meanwhile, Gazprom PJSC has been flush with cash due to high gas prices, despite exports dropping to multiyear lows.
Orders for gas shipments published by Nord Stream AG, the link’s operator, indicate flows will resume at 40% of capacity. That’s higher than the 30% figure published earlier by grid operators in Germany, where the pipeline ends.
If supplies resume at the higher level on Thursday, prices are likely to tumble, according to Goldman Sachs Group Inc.
“The large number of clients that have expected the pipeline to remain at zero post maintenance suggests a sell-off in European gas prices from current levels is likely,” analysts including Samantha Dart said in a report.
But things could still get worse. Putin said flows could decline to just 20% as soon as next week if a turbine, a key part that pushes gas through the link, isn’t sent home in time after being caught up in sanctions when it was sent for repairs in Canada.
Read: Putin Signals Gas Pipeline Will Restart as Clock Ticks Down
“This is more than just about a turbine,” Dart said in an interview with Bloomberg Television. “This is likely a political and economic decision as much as a technical one.”
(Updates with Goldman analyst interview in last paragraph.)
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