Euro surges and natural gas prices sink after Russia resumes flows of fuel through a key pipeline

Natural gas prices in Europe sank after data showed fuel had resumed along a key route.

Fears of an immediate energy crisis in Europe that could plunge the entire region into recession were temporarily alleviated.

The operator of the 759-mile line that delivers Russian natural gas to Germany and other parts of Western Europe was able to resume operations for the first two hours of the day.

Roughly a third of Europe's natural gas is delivered through the pipeline that was closed for 10 days. In response to the European Union's sanctions against Russia, Russia had reduced the amount of gas it pumped before the work began.

Europe depends on Russia for 40% of its natural gas, but individual countries such as Germany are more dependent. With consumers and manufacturers in the region struggling with inflation at multiyear or even record highs, another spike in energy prices could unleash an unprecedented crisis.

The gas is flowing again. An energy crisis has not been solved. Commerzbank strategists said in a note that the EU called for a reduction in gas consumption of 15% over the next eight months.

Natural gas futures in the Netherlands fell in early trading.

After the invasion of Ukraine, the price went up to as much as 345 euros, but has since fallen to around 100-150 euros. It's up 400% this year as supply has been hard to come by.

The euro posted its biggest daily increase against the Russian ruble. It was up against both of the major currencies.

The euro dipped below $1 for the first time in 20 years over the last week. The euro is under pressure because of a divergence in interest rates in the US and the eurozone, where the European Central Bank is expected to deliver its first rate rise in 11 years on Thursday.

Even though gas was flowing again, Russia has already indicated that the amount delivered is likely to drop to 20% of normal levels, meaning the euro is not out of the woods.

By how much, it's clear that headline interest rates need to go up from their current -0.5%, but by how much.

European countries are scrambling to find alternative sources of fuel, such as by firing up idling coal and nuclear power stations, as gas grows scarcer and prospects dwindle of filling the region's storage facilities to the 90% level needed to meet winter demand.