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Major Stress Test in Europe as Russia Shuts Down the Natural Gas Pipeline

This was a recently  announced maintenance shutdown by Russia, but few believe it was necessary. The bigger questions are whether the gas flows again, and how much.
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Russia Tightens the Taps

As Europe races to fill natural gas storage before winter, Russia Halts Nord Stream Gas Pipeline, Ratcheting Up Pressure on Europe.

Russia shut down its main artery for natural gas to Europe for maintenance on Wednesday, in what Western governments see as the latest salvo in the Kremlin’s economic war on the continent.

Moscow has already throttled back deliveries over the Nord Stream pipeline—which links Russia’s prolific Siberian gas fields with Germany under the Baltic Sea—to just 20% of its maximum capacity, citing technical issues with its turbines. European officials have dismissed these explanations and have called the gas cuts an economic attack in retaliation for supporting Ukraine in the war.

Unlike the 10-day annual maintenance in July, the current Nord Stream shut-off caught officials and traders by surprise when it was announced earlier this month. Maintenance operations are usually telegraphed well in advance so that utilities and traders can make alternative arrangements.

While Gazprom restored gas flows following the works in July, it limited supplies just days later, citing technical problems with turbines. 

Energy Overhaul 

Burning Gas

As Europe's energy costs skyrocket, Russia is burning off large amounts of natural gas, according to analysis shared with BBC News. The plant, near the border with Finland, is burning an estimated $10m worth of gas every day. The gas would previously have been exported to Germany.

Q: Why would Russia do that? 
A: It's about well pressure and economic war

It's hard to shut down and restart a well at a moments notice. Well pressure, outside temperatures, and maintenance costs come into play. 

If Russia does not have the storage and does not want to supply the EU then burning it off makes economic sense. 

Military War and Economic War

Russia started the war with Ukraine, but the US and EU started an economic war with sanctions.

Those sanctions have backfired miserably as predicted in advance in this corner.

Russia Is Making Heaps of Money From Oil

Even selling oil at a discount, Russia is making record amounts of money on oil. The New York Times ridiculously says Russia Is Making Heaps of Money From Oil, but There Is a Way to Stop That

Supposedly, the way to stop the profits is a buyers cartel. Such talk is ridiculous but has been going on for months.

There are too many countries willing to buy Russian oil at a discount for the US and EU to set a price. Moreover, Saudi Arabia can always slow production if price drops are too substantial. 

A Laughable Explanation of the G7 Oil Price Buyers' Cartel Emerges

I wrote about the silliness of the idea on June 28 in A Laughable Explanation of the G7 Oil Price Buyers' Cartel Emerges

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The G7 does not want Russia to sell any oil but if they succeeded, the price has to rise unless production picks up elsewhere or demand drops.

Rather than admit economic fundamentals, G7 leaders, especially Biden and Macron keep doubling down on dumber and dumber ideas.

India and China are willing buyers. China alone is sufficient. 

How Stupidity Happens

What's Next?

EU Natural Gas Futures courtesy of Trading Economics

EU Natural Gas Futures courtesy of Trading Economics

Putin is the only one who could possibly know whether Russia turns the gas back on this Saturday and at what rate.

Natural gas futures in the EU have declined a whopping 29 percent in the past five days. That's a market belief that things may be as bad as they get. 

Flows are only 20% of normal, yet EU winter storage is about 85% where it needs to be. 

However, Putin will not want the EU to fill its tanks before Winter so take that into consideration. 

EU Declares Energy Crisis 'Emergency', the US Will Not Be Immune

In case you missed it, please consider EU Declares Energy Crisis 'Emergency', the US Will Not Be Immune

This post originated at MishTalk.Com.

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