European pure fuel futures soared Monday after studies the Biden administration was contemplating curbs on Russian crude imports despatched shock waves throughout commodity markets.
Brent surged to $137/bbl and shortly pared good points to commerce close to $125/bbl round 0630 ET. The main focus is European natgas futures, Dutch fuel, which jumped as excessive as 64% to 335 euros a megawatt-hour — the equal of round $600 a barrel of oil.
Chaotic power markets got here after the US Secretary of State Antony Blinken instructed NBC this previous weekend that the Biden administration is in “very energetic discussions” with European leaders to limit Russian oil imports.
Ole Hansen, head of commodity technique at Saxo Financial institution A/S, instructed Bloomberg he’s at a “misplaced for phrases” for the most recent worth motion of natgas. “Margin calls and really illiquid and unsure markets driving this transfer,” he stated.
Bloomberg notes that EU GDP may very well be slashed by as a lot as 1% or 2.2% yearly ought to Russia’s natgas flows drop to zero. Even in in the present day’s excessive worth setting, the continent is anticipated to take a 0.6% hit. To make sure power safety, EU leaders have accelerated renewable power initiatives and are additionally speaking with different power exporters, such because the US, Qatar, Norway, Egypt, Algeria, and Azerbaijan, to fulfill their natgas wants.
Regardless that spring is lower than two weeks away, heating demand remains to be elevated, and power inflation is crushing the pocketbooks of households throughout the continent. Additionally, one power supplier ceased to offer heating oil to the parliament constructing of Bosnia and Herzegovina in Sarajevo due to hovering costs, newspaper Faktor reported, which implies the services are presently with out warmth.
Because the Russian invasion threatens to cut back or minimize off Russian natgas provides—both within the type of sanctions or Moscow’s retaliation to sanctions—Wooden McKenzie detailed final week that Europe can survive the subsequent winter with out Russian fuel. Nonetheless, costs would stay terribly excessive and can be something however wealth-destroying for households and companies.
“From file lows initially of winter, storage ranges have now re-enter[ed] their five-year vary, albeit on the decrease facet, and are on monitor to be in a extra comfy place by the top of March,” Kateryna Filippenko, principal analyst, Europe fuel analysis, at WoodMac, stated.
“It’s our present evaluation that the EU can get via this winter safely,” Filippenko. However what about subsequent? Natgas provides on the continent are at low ranges, and natgas injections start on the finish of March and early April to resupply stockpiles.
If Russian natgas flows stay low and the West bans Russian power imports, the EU higher discover new suppliers shortly, or power inflation will proceed to wreak havoc.
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