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High gas prices in Europe due to climate concerns


High temperatures and dry weather recorded in Europe during the summer have caused
water levels in the Rhine to drop, sparking fears of disruptions to natural gas and energy
shipments. In addition, the current gas supply of the Beixi No. 1 natural gas pipeline is only
20% of the normal level. This has kept European gas prices above EUR 200/MWh, not
following the fall in global energy prices. EU countries have agreed to cut natural gas use
by 15% in the next few months in order to reach a goal of filling 80% of storage capacity by
winter. However, as the price of natural gas is closely related to producer price inflation,
the incident is exacerbating the market's concerns about the shortage of energy supplies
in Europe in winter and the risk of economic "stagflation", which may limit the short-term
rebound of the euro.
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