Ukraine: Explosions heard in Kyiv: energy prices surge, Brent jumps above $100 (7)

–High energy prices seen in 2022
–Dutch gas, the European benchmark, surges to 120 euros

Feb. 24, 2022

By Mathew Carr

Brent oil has surged above $100 as explosions heard in Ukraine while European natural gas, a global benchmark, extended yesterday’s gains.

Ukraine civilians are not being targeted in the special operation and Russia does not plan to occupy its neighbour, Russia Today reported.

Earlier President Putin said in a televised address to Russia that the “goal is to protect people who have been subjected to abuse, genocide by the Kiev authorities for eight years. To this end, we will strive for the demilitarization and denazification of Ukraine, as well as bringing to justice those who committed numerous bloody crimes against civilians, including citizens of the Russian Federation.” (Xinhua)

Organization for Security and Co-operation in Europe condemned Russia’s move:

Joint statement by OSCE Chairman-in-Office Rau and Secretary General Schmid on Russia’s announcement of a military operation in Ukraine

WARSAW/VIENNA, 24 February 2022 – The OSCE Chairman-in-Office and Foreign Minister of Poland, Zbigniew Rau and OSCE Secretary General Helga Maria Schmid condemned the launch by President Putin of a military operation in Ukraine and made the following statement:

“We strongly condemn Russia’s military action against Ukraine. This attack on Ukraine puts the lives of millions of people at grave risk and is a gross breach of international law and Russia’s commitments.

We call for the immediate cessation of all military activities.”

Oil Jumps to More Than $100

Natgas Surges

ICE: Euros / MWh

EU natural gas and carbon prices closed strongly yesterday:

Dutch natgas on ICE. TTF: Title Transfer Facility — Euros / MWh

EU carbon futures fell 1.5% early on Feb. 24 to 93.68 euros / ton: ICE.

Energy prices are seen high in 2022.

This from Wood Mackenzie — I’ve added emphasis below:

Despite fears that Europe may face a gas crunch following the cancellation of Nord Stream 2, analysts at global energy consultancy Wood Mackenzie, a Verisk business (Nasdaq: VRSK) say Europe is currently in a better situation than it was at the start of the 2021/22 winter.

Kateryna Filippenko, principal analyst, Europe gas research, said: “Mild weather and increased liquefied natural gas (LNG) supplies have softened the impact of continuously low Russian flows and resulted in higher volumes of gas is storage.

“From record lows at the start of winter, storage levels have now re-enter their five-year range, albeit on the lower side, and are on track to be in a more comfortable position by the end of March.”

She said that Wood Mackenzie’s analysis shows that in January-February this year, there was more LNG in Europe’s gas system than Russian gas. High European prices have helped, but this is mainly a result of Asia starting the year with high inventory levels, coupled with mild local temperatures which freed up some LNG cargoes for Europe.

High prices, which are likely to remain through 2022, will encourage Norway to continue strong exports into Europe and will attract more LNG cargoes into Europe, Filippenko said. High hydro levels in Brazil will free up additional LNG cargoes for Europe.

“This will reduce the requirement of Russian gas through 2022. Even relatively low flows at current contractual levels – with Poland and Ukraine transit routes running below full capacity – will result in a comfortable storage position ahead of the next winter,” she added.

“We expect levels to reach about 85% by the end of October, in contrast to 74% at the start of the current winter.

“Overall, the current supply and storage situation means Europe is in a better position both to navigate 2022 without Nord Stream 2 and to prepare for the next winter.”

However, 2023 will be more challenging. Continuous decline of indigenous production coupled with lower availability of LNG supply for Europe – a result of limited supply coming online coupled with increasing Asian demand – will tighten the market further.

Filippenko said Europe may struggle to refill its storage to a comfortable level through summer 2023 and prepare for winter.

She said: “Under average weather conditions, Russian flows limited to contracted levels would result in storage levels at 75% ahead of the winter 2023/24 – similar to levels ahead of the 2021/22 winter.

“If no additional gas is made available from Russia, Europe would be exposed to weather dynamics throughout next winter, similarly to this winter, with prices remaining high and volatile.  Only through increased flows from Russia the situation could ease – this is via existing spare capacity on transit routes through Ukraine and Poland – ensuring higher availability through winter 2023/24.”

Despite improved market dynamics, there is further upside risk to current prices in 2022, as traders price in the risk of Russian supply disruption. An expected price reduction in 2023, as the current forward curve suggests, may not eventuate if Russian imports are limited to contracted levels.

Filippenko said: “If Russian exports to Europe are disrupted, things could obviously get a lot worse. Europe may be able to cope if supply disruptions are limited to Ukraine transit. It would have to pull every lever in the energy system to keep the lights on – reducing gas burn and cranking up mothballed nuclear and coal plants; maximising indigenous gas production and pipeline imports; persuading Asian buyers to use coal and free up LNG.

“But this would only be a temporary solution to get through the summer and would leave Europe with perilously low storage volumes going into winter 2022/23 and risks demand disruptions. Winter prices next year could be higher than 2021/22.”

She added: “If all Russian gas is cut off, Europe would have no chance of coping. Were all gas flows to stop today, Europe could well muddle through in the short term, given higher storage inventories and low summer demand.

“But in the event of prolonged disruption, gas inventory couldn’t be rebuilt through the summer. We’d be facing a catastrophic situation of gas storage being close to zero for next winter. Prices would be sky high. Industries would need to shut down. Inflation would spiral. The European energy crisis could very well trigger a global recession.”

______________________________________________

See this from Alfa Energy earlier:

Energy prices could reach new record levels if the Russia-Ukraine situation deteriorates

[London, February 22nd] — Jeremy Nicholson, Corporate Affairs Officer at Alfa Energy Group, comments on the impact of the Russia-Ukraine crisis on UK/European energy markets:


“Energy users may be horrified at the current cost of their energy supplies, but they should brace themselves for further shocks to come.


“The deterioration of the situation in Ukraine and threat of military action by Russia is adding to the risk of disruption to European gas supplies, putting further pressure on UK/European wholesale gas and power prices.  Oil prices are also being affected, with growing expectation oil could shortly reach or exceed $100 a barrel. 


“European gas stocks remain very low for the time of year, leaving gas and power generation systems more than usually vulnerable if there is any physical disruption to flows of Russian gas (via Ukraine, or otherwise) into western Europe.  With no immediate prospect of the situation in Ukraine being resolved peacefully, and the very real risk of escalation, energy users should expect prices to remain high and volatile in the weeks and months ahead.


“Users should be prepared for energy prices to reach new record levels if the situation deteriorates.  It is encouraged to take advice on the best strategy to manage their exposure to these risks.  High energy prices cannot be avoided, but there are always options to manage the risks to your business or organisation.”

+++

Photo by cottonbro on Pexels.com

CarrZee Comment: Sanctions have failed. Time for a little global collaboration?

See this.

The World is Overthinking What Vladimir Putin Wants as His Legacy (3)

Feb. 23, 2022: CarrZee:

Everyone is thinking …what does Vladimir Putin really want?

The world is probably overthinking it….click link above

Some in the mainstream media seem to want to downplay climate policy because of Mr Putin’s aggression. But the two issues could not be more interlinked.

When dealing with Russia’s leader, let’s talk about the main potential gain for all of earth’s people — getting a G20 agreement on climate action that also spells climate justice. Russia can and should be part of that.

The world should not give into bullies. Full stop. Yet giving Putin a little certainty about gas distribution into Germany, could mean granting the world a whole lot.

https://en.wikipedia.org/wiki/Vladimir_Putin

(Smooths language, adds context, Nord Stream 2, tweets)

(Adds OSCE, tweets, Xinhua snip)

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