Russia extends European gas output cuts as Gazprom halts supply to Dutch trader

© Reuters. FILE PHOTO: In this illustration taken Feb. 8, 2022, a 3D-printed natural gas pipeline is placed in front of the Gazprom sign shown. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) – Russia extended gas cuts to Europe on Tuesday, with Gazprom (MCX: ) shutting off supplies to top Dutch trader GasTerra, intensifying the economic battle between Moscow and Brussels and pushing higher European gas prices.

The move comes a day after Denmark announced a potential end to its Russian gas supplies and the EU’s toughest measure against Russia’s invasion of Ukraine, a deal to halt seaborne imports of its oil.

GasTerra, which buys and trades gas on behalf of the Dutch government, said it had signed contracts elsewhere to buy the 2 billion cubic meters (bcm) of gas it expects to receive from Gazprom by October.

“This is not yet seen as a threat to supply,” said Peter X Brugen-Carter, a spokesman for the Department of Economic Affairs.

Danish company Orsted (OTC: ) warned on Monday that Gazprom Export could also stop supplies, but it also said the move would not immediately put Denmark’s gas supplies at risk.

The benchmark front-month natural gas contract was up around 5% on Tuesday morning at around €91/MWh, but still well below the highs of €300/MWh hit in early March.

“While the market has largely expected both companies to be shut down, this development will tighten the supply-demand balance even more,” ICIS analyst Tom Marzec-Manser said on Twitter (NYSE: ).

Gas flows from Russia to Germany via the Nord Stream pipeline fell on Tuesday, which analysts said could be due to the interruption of the pipeline to the Netherlands.

Moscow has stopped supplies to Bulgaria, Poland and Finland, citing their refusal to pay in Russian rubles, in response to Western sanctions that have isolated Russia, including cutting it off from SWIFT’s international banking information system.

Gas supply cuts have pushed up already high gas prices, fueling inflation and prompting European governments and companies to seek alternative supplies and infrastructure to handle it, including floating storage and regasification units (FSRUs).

Europe has been scrambling to fill its gas storage tanks to shore up supplies ahead of winter, fearing cuts from Russia, which typically supplies about 40% of Europe’s gas.

Data from European Gas Infrastructure shows that natural gas storage in the Netherlands is currently 37% full.

The Dutch government said last week it would increase subsidies to 406 million euros to encourage companies to fill the Bergermeer facility, one of Europe’s largest open gas storage facilities.

EU leaders on Monday agreed in principle to cut EU oil imports from Russia by 90 percent by the end of the year, ratcheting up pressure on Russia’s invasion of Ukraine in what Moscow called a “special military operation.”

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