Russia’s invasion of Ukraine sent energy prices soaring on Thursday, adding to worries about tight supply and raising new questions about the flow of oil and gas from Russia into Europe in the coming months.
Brent crude broke the $100/barrel mark, rising more than 7% to above $104/bbl, its highest level in more than 7 years. West Texas Intermediate crude oil rose to just under $100 a barrel.
The flow of natural gas in Europe is likely to be disrupted by the conflict in Ukraine, analysts say. Its price increased by almost 19% to 105.6 euros a megawatt hour on the TTF exchange in the Netherlands.
Russia supplies about a third of Europe’s gas. Fuel pipelines pass through Ukraine, although volumes through those pipelines have declined in recent months.
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 could be whether flows will be disrupted by Western governments’ sanctions on Moscow for its actions in Ukraine. 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.
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.
If Russia cuts gas exports, Europe will try to differentiate itself from already strained supplies kept in storage, and by scouring the world for more natural gas. more liquefied natural gas. The flow of LNG, mainly from the United States, has exceeded the amount of Russian gas reaching Europe in recent weeks. Such measures would likely benefit Western European countries such as Germany and Italy rather than those in Eastern and Southern Europe with fewer alternatives to Russian gas.
Even without Moscow’s obvious fuel cuts or the war, analysts say there is a significant risk that sky-high gas and electricity prices have hit Europe, say analysts. Europe in recent months will continue indefinitely, squeezing already demanding consumers and, possibly, prompting many businesses to cut production. In recent months, a number of energy-intensive businesses, including fertilizer manufacturers, have announced closures because of high gas costs.
https://www.nytimes.com/2022/02/24/business/oil-prices-soar-and-worries-mount-about-future-energy-supplies.html Oil and gas prices soar and worries about future supply