- European natural gas prices surged 36% Monday after Russia indefinitely stopped flows via Nord Stream 1.
- Russia said turbine issues mean it won't reopen the pipeline from a three-day maintenance shutdown.
- Europe has been plunged into economic crisis by a dramatic rally in energy prices since Russia's invasion of Ukraine.
European natural gas prices surged by as much as 36% on Monday after Russia indefinitely suspended the flow of the vital fossil fuel through the Nord Stream 1 pipeline into Germany.
Dutch TTF futures, Europe's benchmark natural gas price, were last up 28.5% to 268 euros ($266) per megawatt hour, having earlier hit 283 euros. They were on track for their biggest daily rise since May, according to Bloomberg data.
The surge in natural gas drove up electricity prices, as the two are closely linked through the European Union's pricing mechanism.
German baseload year-ahead power, Europe's benchmark electricity price, surged 23% to 625 euros per megawatt hour. Prices stood at 200 euros at the start of the year and just 50 euros at the beginning of 2021.
Russia has squeezed the flow of natural gas to Europe in recent months as relations have deteriorated sharply over Vladimir Putin's invasion of Ukraine in late February.
In July, state-owned energy giant Gazprom cut the flow of natural gas through the Nord Stream 1 pipeline into Germany to just 20% of capacity.
Gazprom closed the pipeline for maintenance on Wednesday, but late on Friday said it would not resume exports, citing an oil spill in a turbine. Analysts noted the announcement came soon after G7 finance ministers agreed the outline of a plan to cap the price of Russian oil.
"While an oil leak at the last compressor unit still in operation was used as explanation, the surprise decision came shortly after the G7's announcement to initiate a price cap on Russian oil," said Ole Hansen, head of commodity strategy at Saxo Bank.
"The energy war has therefore escalated further," Hansen said.
European natural gas prices have surged more than 300% this year, according to Bloomberg data, piling pressure on the continent's economy. The European Union got around 24% of its energy from natural gas in 2020.
Politico reported Monday that EU officials have spent the weekend scrambling to come up with a plan to intervene in energy markets. The Czech presidency of the Council of the EU is pushing other European governments to declare which measures they would back, Politico said.
Saxo Bank's Hansen noted that Europe looks set to lose about 4% of its natural gas supply.
"While storage levels across the Euro area have grown rapidly in recent weeks due to surging imports of LNG, the prospect for rationing and further initiatives to curb demand for gas and power prices will be the focus this week."
The European energy shock rippled through markets on Monday. The euro tumbled below $0.99 for the first time in two decades, and the continent-wide Stoxx 600 stock index dropped 1.18%.