European power prices soar to a record high as Russia slashes natural gas supplies, pushing the continent to the brink of recession

• European power prices soared to a record high on Wednesday, as Russia slashed the supply of natural gas to the continent.
• Natural gas prices also shot higher, piling the pressure on the eurozone's already fragile economy.

The cost of buying electricity in Europe soared to a record high on Wednesday after Russia slashed the flow of natural gas into the continent, piling pressure on the continent's already fragile economy.

German power for delivery next year, the benchmark European price, shot up to a record 388 euros ($394) per megawatt hour on Wednesday — more than 400% higher than a year earlier. It later pared its gains slightly.

The surge in electricity prices came as European natural gas prices — which are a key input in power generation — rose for the sixth day in a row as Russia followed through on its promise to further choke off supplies.

Dutch TTF natural gas futures, the European benchmark, were 2% higher on Wednesday at 203.50 euros per megawatt hour. That was more than 26% higher than Friday's close and roughly 780% above a year earlier.

Russia's Gazprom said on Monday it would slash the supply of natural gas into Germany and Europe through the Nord Stream 1 pipeline to just 20% of capacity, blaming a technical issue with a turbine.

Nord Stream data showed that flows through the pipeline dropped to around 20% of capacity on Wednesday morning.

Russia had previously cut flows to 40%, with European governments accusing President Vladimir Putin of using natural gas as an economic weapon in response to sanctions over the war in Ukraine.

The latest cut in Russian natural gas supplies to Europe will deal a huge blow to the region's economy, analysts said, which was already slowing under the weight of soaring inflation and higher borrowing costs.

"This will see electricity turning from a utility into a luxury good for many Europeans, while it severely damages industrial competitiveness even before any more heavy-handed decisions to ration energy use will be made," said Stefan Koopman, senior macro strategist at Rabobank, in a note to clients on Wednesday.

Goldman Sachs said on Tuesday it now expects the eurozone to fall into recession in the second half of the year.

"Reduced supply of Russian gas and high gas prices are set to weigh markedly on activity in coming quarters," the bank's analysts, led by economist Sven Jari Stehn, said in a note.

"A complete gas supply stop remains a live possibility, especially during the winter months. We estimate that such a stop would push the euro area into a sharp recession."