European gas crisis going from 'bad' to 'ugly' – report

The European energy crisis is getting worse, the Markets Insider news website reported on Monday, quoting a research note from Bank of America.

"The European gas situation has quickly moved from our 'bad' to our 'ugly' scenario in the past month," the bank reportedly said, pointing to reduced supplies of Russian natural gas to the region.

The main pipeline that carries Russian gas to the EU is currently operating at 20% of capacity due to technical issues caused by sanctions against Russia. In July the pipeline closed for a ten-day annual maintenance period, stopping the flow completely. Supplies through Ukraine have also been slashed, after Kiev shut down a key entry point for Russian gas transit to Europe. The reduction has sparked numerous warnings that the continent may run out of gas this winter.

"With Nord Stream 1 pipeline flows at 20% of capacity, storage builds into winter could be insufficient and the EU is now planning for widespread demand rationing. How did this happen?" Markets Insider quotes Bank of America researchers as saying.

READ MORE: EU facing winter energy crisis – Borrell

Gas prices in Europe have quadrupled this year on tight supply, translating into higher household bills and leading to the adoption of an EU-wide gas rationing plan.

The EU has diversified its imports by buying more liquified natural gas (LNG), as well as increasing supplies of pipeline gas from Norway, Algeria and Azerbaijan. However, according to the EU top diplomat Josep Borrell, the bloc is “approaching the limits of what extra gas” it can buy from “non-Russian sources”.