Written on: September 6, 2022
Concerns about a ripple effect of oil and gas prices this winter were triggered Monday after Russia said one of its main gas supply pipelines to Europe would be shut indefinitely. European gas prices immediately shot up 30% higher on the news. On Friday, prices were up after Russia said that a leak in Nord Stream 1 pipeline equipment would keep it shut beyond a three-day maintenance halt.
Europe has accused Russia of weaponizing energy supplies in retaliation for Western sanctions imposed following the invasion of Ukraine. Russia claims the West has launched an economic war and sanctions have hampered pipeline operations.
As noted two weeks ago, concerns over natural gas supplies in Europe present another huge challenge as demand for U.S. propane to replace natural gas in Europe would likely be a big factor for U.S. retail propane marketers. EIA inventory data last week showed propane at 72.2mmbbls, up from 68mmbbls a week earlier. Year ago levels were at 69.3mmbbls. Analysts see little downside for winter propane prices even if temperatures remain warmer than normal but note that a bump up of a dollar or more could result from strong demand both in the U.S. and Europe. Coverage of all fixed and capped sales is strongly urged by consultants as always but especially given the current situation.