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Worsening Energy Scenario in Germany
Worsening Energy Scenario in Germany

Worsening Energy Scenario in Germany

  • 07-Jul-2022 5:25 PM
  • Journalist: Jung Hoon

The energy crisis in Europe worsens, and the ongoing war between Russia and Europe threatens to engulf the turbulent oil market of Europe. Europe primarily depends on Liquified Natural Gas for its energy requirements. The West's Embargo of Russian oil and gas as an act of opposition against Moscow's invasion of Ukraine pushed many European countries into an energy crisis.

Russia's decision to cut back on gas flowing into Germany through the Nord stream pipelines increases the fear of further supply disruption of Natural Gas in Europe. Buyers have now started publicly addressing the impact of reduced Gas flow into Europe. Uniper is the highest buyer of Russian gas. They have announced that the company will need financial help due to the high price of natural gas procured from alternate sources. Uniper has been receiving only 40% of its contracted supply from Gazprom, a Russian refinery. The supply situation will worsen when the Nord stream pipeline shuts down for annual maintenance from July 11 to July 21. The fear in the European market regarding no supply through the Nord Stream pipeline gas after maintenance runs is rising due to the recent supply behavior from Gazprom.

Germany is investing billions of Euros to fill its gas inventories for the summer, but it seems unlikely to replenish them under the current circumstances. So, the country is about to vote on the revival of coal usage for its energy requirements. Two major Libyan export facilities have announced Force majeures, which will further disrupt the supply of Natural gas to Europe, further impacting the energy market of Europe.

According to ChemAnalyst, the price of Liquified Natural Gas in Europe will likely rise in the third quarter as the summer season usually requires more energy in fueling cooling equipment. Countries are desperate to replenish their gas shortages to see through the summer, and high market competitiveness always leads to higher commodity costs. The price of natural gas in Germany will likely increase drastically until the summer season ends.

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