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(Bloomberg) — Summer used to be a slow season for Europe’s gas market, but for a third year in a row, it’s shaping up to be full of tension.

In a sign of the long-lasting damage left by the energy crisis, traders are once again heeding global risks that could upend the region’s balance of fuel supplies. Front and center to those are potential actions by Russia, as well as other events that would hinder the production and movement of liquefied natural gas around the globe.

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While volatility is nowhere near the highs of summer 2022, Europe’s market been quick to react to drivers that could make it more difficult to build up fuel inventories in time for winter. 

EU Sanctions on Russian LNG

One of those risks is related to sanctions the European Union is considering imposing on the transshipments of Russian LNG through its ports. Producer Novatek PJSC relies on stopovers in the bloc to change vessels and move the fuel from the Arctic to other parts of the world, and it’s unclear how it might respond.

While the ban hasn’t been signed off yet — member states continue to haggle over the final details of a new sanctions package — the decision is being closely watched as it’s the closest the EU has come to clamping down on Russia’s LNG operations.

The move could further complicate global shipping logistics. Some experts suspect it may lead to more Russian LNG remaining in the EU as it becomes more difficult to send it elsewhere. Imports from the country have remained strong since the start of the war in Ukraine. 

That “may not be the intended effect, but may have a downward effect on prices,” said Anne-Sophie Corbeau, researcher at the Center on Global Energy Policy at Columbia University.

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Outages in Norway and Elsewhere

Norway is Europe’s top gas supplier now that most of Russian pipeline supply is gone. That has kept traders glued to alerts from the national network operator, which flags unplanned outages or any changes to planned seasonal works.

Earlier this month, a pipeline fault briefly shut down a massive processing plant in the North Sea, causing prices to spike and signaling how sensitive the market is to such disruptions. In September a number of yearly works will take place in Norway, raising the stakes if something goes wrong just before the heating season.

Outages elsewhere in the world also have potential to tighten Europe’s market, especially if they coincide with heat waves. The US, a key supplier of LNG, is entering hurricane season, which has led to disruptions before. 

Russia-Ukraine Gas Transit

Moscow and Kyiv currently have a gas transit agreement in place that allows Russian flows to cross Ukraine and enter Europe. But that deal expires at the end of 2024, potentially cutting countries like Austria and Slovakia off from about 15 billion cubic meters per year of Russian supply.

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Austria has said it can source gas elsewhere. Still, European officials are pondering how to keep gas flowing while not benefiting Vladimir Putin’s war machine. One option that’s been discussed is for European companies to buy and inject fuel from Azerbaijan. Any agreement is still far away.

Uniper’s Gazprom Damages

Another key question is how the aggressively German utility Uniper SE and its government owner will pursue damages from Russia’s Gazprom PJSC. A Swedish court last week awarded the German firm more than €13 billion ($14 billion) in compensation for undelivered gas during the energy crisis.

As Gazprom is unlikely to pay the damages — and barely has assets left in Europe that can be seized — payments could be rerouted from European companies that still receive Russian gas, such as OMV AG in Austria. If that happens, Gazprom would likely cut off those flows.

“That’s the one which could impact summer prices the most if suddenly we lose around 6 billion cubic meters a year under the OMV contract,” Corbeau said. 

Slower Storage Refills

Last but not least, the pace of refilling Europe’s gas storage facilities has slowed recently. While levels are still well above seasonal averages, inventories act as an important buffer to supply disruptions. For now, Europe is still expected to replenish them before the heating season starts. 

—With assistance from Jonathan Tirone, John Ainger and Priscila Azevedo Rocha.

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