European natural gas prices jump 7% as Russia squeezes supplies and Germany's Rhine river runs low

• European natural gas prices jumped Wednesday as worries grew over Russian supplies and the Rhine river ran low.
• Prices are close to record highs as the continent rushes to fill its storage capacity before what could be a brutal winter.

European natural gas prices jumped once again on Wednesday as Russia continued to squeeze energy supplies to Europe and the water in Germany's Rhine river dropped to crisis levels.

Dutch TTF natural gas futures, the benchmark European price, were up 7.4% to 206.4 euros ($214) per megawatt hour Wednesday, not far off record highs of above 210 euros hit in late July. European gas prices are up more than 640% from a year earlier.

Europe is racing to fill its natural gas storage capacity to ensure supplies last through the winter, after Russia slashed the flow of the crucial fossil fuel through the Nord Stream 1 pipeline to just 20% of capacity.

On Tuesday, Russian company Transneft said the flow of oil through the part of the key Druzhba pipeline which connects Russia to central Europe had been halted for five days due to a dispute over payments. The announcement raised more concerns on the continent about energy security.

"The halt in the oil flow on the Druzhba pipeline is reminding the market that Russia will game the energy supply to Europe both now and through the coming winter," Bjarne Schieldrop, commodities analyst at Swedish bank SEB, told Insider.

Meanwhile, Europe's river Rhine — a vital energy transport artery which flows through Germany — is running dangerously low after a prolonged drought in Europe. Large barges may soon be unable to transport fuel up and down the river to factories such as those of chemical company BASF.

Ole Hansen, chief commodities strategist at Saxo Bank, told Insider: "The drought this summer across Europe has lowered the water levels on the river Rhine to a level that soon will make it impossible to ship coal and fuels, the result potentially forcing demand up for pipelined gas."

He said European countries have been filling up their gas storage, largely by factories cutting back on their usage. Hansen said further demand curbs and more imports of liquefied natural gas are likely the only option for Europe ahead of the winter.

Joshua Mahony, an analyst at trading platform IG, told Insider: "Should supply dry up over these final months of summer, there is a distinct risk that energy usage is rationed to the detriment of economic activity in the region."

Craig Erlam, market analyst at currency firm Oanda, said the volatile period for European energy shows little sign of fading.

"The market is extremely tight, storage low and Russian supplies both diminished and unreliable. Against this backdrop, the market is extremely sensitive to further supply disruptions, and the weather," he told Insider.