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Gas prices rise amid Russia supply squeeze

·2 min read
Russia supplies about 40pc of Europe's gas - Sergei Bobylev/TASS
Russia supplies about 40pc of Europe's gas - Sergei Bobylev/TASS

Gas prices in Europe have hit a 13-year high as Russian supply to the market is tightened.

UK and European gas contracts have risen above €30 per megawatt hour for the first time since 2008, driving up prices for businesses and consumers.

It comes as exports to Europe from Russia's Gazprom have dropped by about a fifth compared to before the pandemic, according to the Financial Times, even as demand has rebounded. About 40pc of Europe's gas supplies come from Russia.

The squeeze has also been driven by cold weather, low stocks and the replacement of coal with natural gas for power generation.

Energy experts told the Financial Times that Gazprom was meeting its contractual obligations, but was reluctant to add supplies through short-term measures such as spot market sales.

It comes as Russia tries to finish its controversial Nord Stream 2 gas pipeline under the Baltic Sea between Russia and Germany, with financial backing from European companies including Shell and Wintershall Dea.

Many politicians in Europe and the US oppose the project amid concerns it is cutting out Ukraine and increases Europe's reliance on Russia for energy.

Russian news agency TASS said this month there were just 62 miles of the pipeline left to build. The Biden administration has waived sanctions on the project in an effort to repair relations with Germany.

The UK does not have a direct gas pipeline to Russia but imports from Europe, which in turn imports from Russia.

Most of the UK's gas comes from the North Sea and Norway. It also imports shipments of gas from Russia via cargoes of liquified natural gas.

Gazprom said it was "delivering gas strictly in accordance with the customers' requests," adding: "The basis of our business in Europe is long-term contracts. We have always followed and continue to adhere to this approach. We strictly fulfill the requests of our clients."

Meanwhile, US natural gas futures hit their highest level in two years on Thursday.