Following the signing of an order by Russian President Vladimir Putin ordering the deployment of “peacekeeping forces” to the two separatist regions of Ukraine that he formally acknowledged on February 21, the price of oil and natural gas soared.
Indeed, European natural gas led commodity gains, surging up to 13%. German electricity and coal costs climbed at the same time that Brent crude oil was closing in on $100 a barrel on February 22, 2022.
It’s also worth mentioning that Russia is the largest supplier of natural gas to Europe, with over a third of that supply traveling via pipelines that pass Ukraine. It is also a key exporter of a wide range of commodities, from crude oil to refined products.
It is unclear how many soldiers will be sent in or when they will arrive, but a conflict of any sort might jeopardize Russia’s energy supplies to the rest of Europe.
Western sanctions may affect energy flows
It is also possible that sanctions imposed by the west may affect energy flows, with any restrictions on Russia’s capacity to trade in foreign currencies having the potential to disrupt commodity markets ranging from anything from oil, gas and metals.
According to senior research fellow at the Oxford Institute for Energy Studies, Katja Yafimava:
“Some U.S., EU sanctions are likely to follow <…> This means yet higher gas prices for longer as the market has already been very nervous for months.”
While Asia oil lead at FGE, Sri Paravaikkarasu, told Bloomberg.
“The oil market will continue to be on a knife’s edge over the next few months. We could see prices surpass the $100-a-barrel mark very quickly.”
Since the summer, Russia has restricted gas exports to Europe, owing to a reduction in sales on the spot market and a failure to fill its storage facilities in the European Union in time for the winter.
Despite the fact that Europe has averted the worst-case scenario for the crisis, which included rolling blackouts, the continent remains reliant on Russia for a third of its natural gas requirements.