Russian gas supplies to Europe dipped further on Thursday, raising fears over winter storage replenishment and prompting a diplomatic spat as Russian provider Gazprom (GAZP.MM) accused Western sanctions for impeding maintenance work.

The decrease in supplies comes as the leaders of Germany, Italy, and France visit Ukraine, where they are under pressure to deliver additional weaponry to Kyiv for its battle with Russia and to support its aspiration to join the European Union. more info

On Thursday, Gazprom announced the second supply reduction in two days along the Nord Stream 1 pipeline to Germany, reducing flows to 40% of capacity.

The action, according to Germany’s economics minister, is intended to create uncertainty and raise energy costs.

The European benchmark, Dutch wholesale gas prices, increased by up to 25% on Thursday morning.

Gazprom blamed the reduction on delayed deliveries of Siemens Energy (ENR1n.DE) equipment in Canada for maintenance. That argument was rejected by Germany’s energy authority.

Uniper (UN01.DE), Germany’s largest importer of Russian gas, said supplies from Russia were a fourth of what had been agreed upon, but that the remaining amounts could be obtained from other sources.

Gas supplies to Italy were also reduced, while Czech power provider CEZ (CEZP.PR) said it had seen a similar reduction in its Russian gas supply but was making up the difference with other sources.

OMV (OMVV.VI), an Austrian energy company, also said that Gazprom had warned them of a slowdown in gas delivery.

The restrictions come as Nord Stream 1 prepares for yearly maintenance on July 11-21, when supplies will be totally shut off.

They also come as the continent prepares to replenish winter stockpiles while vowing to lessen its dependency on Russian gas in the future. more info

The drop in supplies from Gazprom to Germany is a warning sign that might pose issues for Europe’s largest economy this winter, according to the director of the country’s energy regulator, who spoke to a newspaper on Thursday. more info

“It would significantly worsen our situation,” Klaus Mueller told the Rheinische Post newspaper.

“We may be able to get through the summer now that the heating season is finished. However, we must fill the storage facilities in order to get through the winter.”

Meanwhile, Centrica (CNA.L) of the United Kingdom has struck an arrangement with Equinor (EQNR.OL) of Norway for extra gas deliveries to the United Kingdom over the next three winters.

Because Britain is not reliant on Russian gas imports, it is less exposed to the present supply shock, and it can export gas to Europe through pipelines.

In addition to worries over Nord Stream flows, availability of liquefied natural gas (LNG) is expected to tighten in the coming months. more info

Damage from a fire last week at a U.S. LNG export facility in Texas controlled by Freeport LNG will keep it closed until September and only partially operational until the end of the year.

The facility contributes for around 20% of US LNG exports and is a key provider to European clients looking for alternatives to Russian gas.

“There is risk of further delay, in our view, as plant restart is subject to regulatory approval and there are two ongoing investigations on the cause of the LNG leak and resulting excess emissions of various pollutants, which may require stringent safety assessments,” Jefferies analysts added.

Source: Reuters

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