Oil prices approached $100 a barrel on Tuesday, their highest in more than seven years, and European gas futures rose 13% faster, amid growing fears of armed conflict in post-Kremlin Ukraine. ordered Russian troops to enter the breakaway territories late on Monday.
The price of Brent crude, the international standard, was close to hitting $100 a barrel on Tuesday before falling to around $97 a barrel, up 2%. West Texas Intermediate was trading at nearly $94.00 a barrel, up about 3%.
European natural gas futures are particularly sensitive to the latest news, because Russia supplies more than a third of Europe’s supply, with some of it running through pipelines in Ukraine. Last month’s Dutch gasoline futures contract jumped 13.8% as trading began on Tuesday, then fell slightly to around 80 euros a megawatt-hour, an increase of almost 10 percent.
After a week of flat oil prices, Uncertainty has enveloped the market in recent days. Prices edged higher on Sunday as more troops gathered on the Ukrainian border, then fell again as diplomatic solutions seemed more sensible.
An invasion could disrupt Russian shipments of natural gas and oil to parts of Europe, followed by a decline in Russian energy purchases by the West. Russia produces about 10% of the world’s oil supply and, in recent years, about a third of Europe’s gas. In recent months, the flow of Russian gas to Europe has plummeted, with much of the shortfall created by Liquefied natural gas shipments from the United States and other places.
Understanding Russia’s relationship with the West
Tensions between regions are growing and Russian President Putin is increasingly willing to take on geopolitical risks and assert his demands.
A key issue is how far the West will go in imposing sanctions that could undermine Russian oil and gas. business, which is vital to the national economy and the main source of revenue for the Kremlin’s budget.
Analysts say Western nations may try to avoid affecting oil and gas exports because of the potential impact on world energy markets, particularly in Europe, which is struggling with high gas and electricity prices.
But a number of financial sanctions under consideration, including restrictions on dealings with major Russian banks, could disrupt Western payments for oil and gas, which account for about half of the country’s exports.
In addition, sanctions could create difficulties for Western oil companies with interests in Russia. The list of such properties is extensive. Shell, Europe’s largest oil and gas company, has a stake in the liquefied natural gas project on Sakhalin Island off the east coast of Russia. Exxon Mobil is a partner of an oil and gas facility in the same region. TotalEnergies, the French giant, is engaged in Russian Arctic liquefied natural gas extraction. BP has a nearly 20% stake in Rosneft, Russia’s national oil company.
“A number of financial sanctions are being considered in Washington that could pose a challenge for such companies to continue operating,” said Helima Croft, an analyst at RBC Capital Markets, an investment bank. in Russia.
In the event of a disruption in energy supplies, the United States and many other industrialized countries will most likely consider releasing millions of barrels of oil from their strategic reserves in an effort to offset any disruption. any shortage. Washington will also rely on oil-producing nations, including Saudi Arabia and the United Arab Emirates, believed to be able to increase output.
There’s also talk in Washington of suspending federal taxes on gasoline, which could help rein in pump prices, at least for the short term.
Consumers in the United States have felt the pain of higher prices, along with their European counterparts. The national average price of a gallon of gas rose nearly 4 cents last week to $3.53, about 90 cents higher than a year ago. Gasoline prices at the pump usually follow the world oil price trend for about a week or two.
https://www.nytimes.com/2022/02/22/business/oil-prices-russia-ukraine.html Oil and gas prices near record highs as Russia-Ukraine conflict escalates