Oil and gas prices soar and worries about future supply

The conflict is brewing as supplies of oil and natural gas have been scarce for months, driving prices up and creating a situation where the risk of disruptions will rise even higher.

In the case of oil, the key question may be whether flows will be disrupted due to sanctions. Russia is a producer of about a tenth of a barrel of oil globally, so any conflict involving the country is deeply worrisome for oil traders.

If oil prices continue to rise, pressure will increase on countries such as Saudi Arabia and the United Arab Emirates – two of which are believed to have room to increase production – production must be increased.

OPEC Plus, a group that includes OPEC and other producers including Russia, has fallen short of its production target and has been pressed by both Washington and the International Energy Agency to ramp up. However, Russia is the co-leader of the group along with Saudi Arabia, and so such discussions can be very awkward.

OPEC Plus plans to discuss the oil market at its regularly scheduled meetings on Wednesday.

The International Energy Agency, which will likely coordinate the response to the dire impact on global supply, said member countries that are net importers of oil are required to hold 90-day inventories.

The agency said on Thursday that the “immediate highest risk” is 250,000 barrels of oil per day from Russia transiting Ukraine to Hungary, Slovakia and the Czech Republic. That amount is relatively small in a global market that consumes 100 million bpd, but could create problems for those countries.

As for natural gas, the question is whether Russia will continue to supply it to major customers such as Germany and Italy or choose to use the fuel as a weapon in retaliation for sanctions. German Chancellor Olaf Scholz on Tuesday halted the certification of Nord Stream 2, the new $11 billion gas pipeline linking Russia and Germany, prompting an angry response from Russian officials.

https://www.nytimes.com/2022/02/24/business/oil-gas-energy-supplies-russia.html Oil and gas prices soar and worries about future supply

Fry Electronics Team

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