Norway on strike, gas prices on the rise!

Norway's oil and gas sector is on strike. Workers are demanding pay rises due to rising inflation. Initially, it was estimated that gas production could fall by 25%, while oil production could decrease by 15%. The reality could turn out to be even worse. The association of oil and gas producers in Norway reports that oil production has fallen by 341,000 bpd since Saturday, while gas exports have decreased by 56%. Norway is currently one of the largest gas suppliers to Europe, given the sharp decline in gas exports from Russia and still limited exports from the US to Europe (the US overtook Russia as the 1st supplier, but the recent closure of the Freeport terminal may again lead to a reshuffle).

How is the market reacting? The decline in oil production is sizable, and oil prices are falling, even as Saudi Arabia raised export prices. US gas prices are not shifting their course as well, as stockpiles are  filling up at slightly faster pace.

Gas prices on the Dutch stock exchange are much more responsive, where the MWh price reached €170.00. However, prices may continue to rise, given the sharp decline in exports from Russia (some even expect complete suspension of exports). Poland seems to be safe for the winter period, as the warehouses are 90% filled (usually this level was recorded at the turn of October and November). The situation is worse in other Western European countries, in particular Germany, where the warehouses are about 50% full (it is worth remembering, however, that warehouses in Germany are about 5-6 times larger than in Poland). What else is worth knowing?

• Norway supplies as much as 13% of the daily gas flow to Europe

• Norway is the main gas supplier to the UK, which puts even more pressure on the UK economy

• Gazprom cut 60% of gas transfer to Western Europe via Nordstream I, full shutdown of the pipeline is planned next week due to "maintenance" reasons

• However, the question is whether Russia will resume transfers,as it earns record amounts of money from oil. Russia earns a fortune and produces more than it did before the invasion (though still below its all-time high)

• The gas price in Europe currently stands at € 170.00 / MWh, which equates to $ 50 MMBTU. However, the United States is unable to supply more gas to Europe due to limited export capabilities and the need to rebuild its own stockpiles

Gas prices in the US are nearly 10 times lower compared to Europe! Source: Bloomberg

Gas transfer to Western Europe via Gazprom has decreased by 60% and maintenance work is underway, which may further limit exports. However, Russia does not need to resume gas transfers, which would be disastrous for the economy of Germany and the whole of Europe. Source: Bloomberg