European gas jumps to record as Russian flows reverse direction

European gas prices jumped to a record high after Russian flows via a key route reversed direction.

European gas prices jumped to a record high after Russian flows via a key route reversed direction.

Futures surged as much as 11 per cent as Russian gas was flowing eastward from Germany to Poland, according to network operator Gascade. The change in flows probably reflects lower orders from German buyers due to the holiday season, said Katja Yafimava, a senior research fellow at the Oxford Institute for Energy Studies.

Lower supplies into Germany will force Europe to keep withdrawing gas at high rates from its already depleted storages. As freezing temperatures spread across the continent this week, more gas will be needed to keep the lights on as Europe’s vast network of renewable sources also can’t fill the gap, with German wind output at the lowest in five weeks.

“These exciting times will continue for a bit longer and will probably not end before the winter ends,” said Hans van Cleef, a senior energy economist at ABN Amro. “Depending on how much inventories will be left by then, the price effects of current shortages could last even much longer.”

Analysts expect gas stockpiles to end the season at a record low, potentially extending Europe’s energy crunch into next winter, a headache for policy makers already contending with rising inflation. Tensions between Russia and Ukraine are also leaving the market on edge, with fear of an invasion early next year.