BAKU, Azerbaijan, July 26. Even if the Nord Stream 1 pipeline capacity remains at 40 percent, it will still keep the supply and demand balance in the energy markets extremely tight during the winter, Trend reports via the research from JP Morgan investment bank.
“Nord Stream 1 flows returned to 40 percent of capacity at the end of its planned maintenance period on Thursday. For this week, at least, the stagflationary recession scenario targets for euro credit are out-of-play, and it was these headlines which triggered the bulk of the move tighter earlier in the week,” the report said.
According to JP Morgan, unfortunately, this may turn out to be only a temporary respite, since “energy weapons” are still on the negotiating table. Russia has already made it clear that the capacity of Nord Stream 1 may drop to 20 percent as early as next Tuesday, depending on the arrival of the repaired turbine from Canada (which, according to the German Ministry of Economy, currently has no real technical significance for the pipeline). Despite this, it will be difficult to see a sustained credit rally in the euro while such an acute macroeconomic risk hangs over the market.
“Further, policymakers are already taking preemptive action to prevent an energy shortage, with the European Commission proposing a voluntary 15 percent reduction in gas use this week. Altogether, this could still pose a threat to growth, which may already be materializing with the Euro Area composite PMI slipping into contractionary territory this month,” the report concluded.
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