Gas Exports Halt! Industries Shutdown and Recession Coming
European gas futures prices spiked more than 32% on Monday mainly because Russia shuts down the gas exports via Nord Stream 1 pipeline.
1. Timeline of the Shutdown Story
On September 2, the Russian gas giant Gazprom announced that Nord Stream 1 could not resume gas deliveries as planned due to new technical problems discovered during maintenance. It means Nord Stream 1's gas flow dropped from 30 MMcf/day to zero.
On September 5, Dmitry Peskov, a spokesman for Russian President Vladimir Putin blamed
sanctions “introduced against our country by western countries including Germany and the UK for Russia’s failure to deliver gas through the Nord Stream 1 pipeline.
Other reasons that would cause problems with the pumping don’t exist
Peskov added that Russia’s full resumption of gas supplies via Nord Stream 1 was “undoubtedly” dependent on whether the west would lift its sanctions on Moscow.
2. Why Nord Stream 1 So Important?
Data show that Nord Stream 1 delivers 55 billion cubic meters of gas per year, and the pipeline accounts for 53% of Russian gas exports to Europe so far this year.
Although current gas reserves in Europe are 21% higher than last year, it's still a question that whether Europe can get enough gas for the winter. The shortage of gass will continue affect industry production.
Disruptions in gas supplies have triggered a renewed surge in gas and electricity prices and could continue to drive inflation to new highs.
3. Analysts: Speed Up Europe Recession
With the "Nord Stream-1" pipeline "out of gas", European gas prices soared again and made the industry and manufacturing sector increasingly difficult because it is extremely dependent on natural gas. European economy may face an inevitable recession.
Italian Federation of Industrialists President Bonomi recently said that
if Russia completely stops natural gas to Italy, one-fifth of industrial production in Italy will shutdown.
Goldman Sachs believes that
the ongoing energy crisis has further weakened Europe's growth prospects, with recession expected to happen in the UK and the eurozone. If gas supplies remain tight, Europe's recession will be prolonged and deepened.
4. Industries and Companies Will be Affected?
The frenzied rush for natural gas in Europe has pushed up freight rates for carriers, liquefied natural gas ships (LNG ships); oil and gas transportation stocks related to natural gas transportation also went up.
- $Scorpio Tankers(STNG)$ is up over 200% for the year and closed up over 3.9% on Friday;
- $Torm PLC (TRMD)$ is up over 130% for the year and closed up 5.67% on Friday;
- $Golar Marine (GLNG)$ is up over 110% for the year and closed up 4.15% on Friday.
What's your opinion towards the shutdown of the Nord Stream 1?
Will this move affect the global industry chain?
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Disruption in supply causes more hikes in the price of gas. This could cause slowdowns in European economies and accelerate the route towards recession. Solar-related stocks may be in favor as Germans are flocking to install solar panels to reduce their reliance on gas.
Bbq is the theme of 2022!
The market like to react on the any things like this.
It may go red... [Thinking]
Energy stocks may go crazily high...