One of the first sanctions taken by the Germans, after Vladimir Putin’s decision to invade the Ukrainian separatist regions of Donbass, recognized by him as independent, was the suspension of the Nord Stream 2 gas pipeline project. operational, it will have little short-term impact on global oil and gas markets.
Indeed, if the sanctions related to the cessation of Russian oil and gas imports, the effects would be immediate on prices. This Tuesday afternoon, the Ukrainian geopolitical risk made the price of a barrel of Brent – the European benchmark for oil – gain a little less than 2 dollars, around 97 dollars. That of the barrel of WTI, the American benchmark, gained more than 1%, to evolve around 93 dollars.
“The market reaction still remains disciplined although more volatility is expected as the military and political situation evolves and is likely to worsen”says Gregor Hirt, director of multi-asset management at Allianz GI.
Deliveries are not suspended
This wait-and-see attitude of the market is explained by the fact that oil and gas flows are not currently cut off. If so, that would radically change the situation.
“The conflict in Ukraine could impact global markets in three ways: energy prices, lenders to Russia, and the risk of a Russian cyberattack. attention so far, it was rightly because their surge has fueled global inflation.Several European countries, Germany in particular, are the first to be affected due to dependence on Russian gas supplies Indeed, the lack of cohesion of EU members to respond to the threat of war is explained by divisions related to energy”explains Steven Barrow, economist at Standard Bank.
READ ALSO |
Indeed, Russia is one of the world’s leading producers and exporters of oil with Saudi Arabia, with an estimated share of 12% according to JP Morgan estimates. However, almost half of these exports of crude and condensates are destined for Europe. And the first customer as a country is China, which buys a third of Russian exported crude. Deliveries are made via the network of pipelines managed by the Russian company Transneft which connects the Russian oil fields to Europe and Asia. With its 1.5 million barrels per day, a volume greater than the production of a country like Nigeria, the Druzhba pipeline supplies Russian crude to refineries in Poland, Germany, the Czech Republic, Hungary, from Slovakia, via Belarus and Ukraine. The risk is therefore significant in the event of a suspension of oil deliveries.
US buys Russian crude
Moreover, and this is less well known, the United States is also a buyer of Russian crude from which they import 600,000 to 800,000 barrels per day. A volume that represented 10% of US oil imports in May 2021, according to the US Energy Information Administration (EIA), while it was only 4% in 2018.
This increase is a consequence of the American sanctions against Venezuela applied in 2019. The Bolivarian Republic delivered Uncle Sam in heavy crude sought by American refiners who had to find other sources of supply for this quality, including Russia.
“The balance of oil market fundamentals is such today that if tensions between Russia and Ukraine were to cease, the price per barrel would likely fall to $84. On the other hand, any disruption in oil deliveries from Russia amid low spare capacity in other countries could easily push oil prices up to $120 a barrel. A halving of Russian oil exports would likely send the price of Brent to $150 a barrel.”warns Natasha Kaneva, director of global commodity markets strategy at JP Morgan, in a note released last week.
As for natural gas, which has been the subject of disputes between Russia and Ukraine for years, its price has already reached historical records this winter (multiplied by ten compared to the average) due to the energy crisis that crosses Europe.
However, Russia exports some 37% of its production, mainly to EU countries, meeting 45% of its needs, of which a large part (70%) passes through gas pipelines, three exactly: Nord Stream 1 (capacity of 55 billion m3), Yamal-Europe (capacity 33 billion m3) which passes through Belarus and Poland, and a final network consisting of 3 gas pipelines (Brotherhood, Soyuz, Progress) which pass through Ukraine in particular, with a combined capacity of 33 billion m3.
–
–
The limited alternative to LNG
This addiction having shown its limits this winter, with the tensions on the Ukrainian file, Europe began to diversify its supplies, by buying more liquefied natural gas (LNG), in particular from Asia and the United Stateswhich have become the leading LNG exporters ahead of Qatar and Australia.
However, the use of LNG also has drawbacks. “Any disruption in natural gas exports to Europe via pipelines will place the burden of summer restocking on LNG. saw in December, when prices reached 180 euros per MWh”said Shikha Chaturvedi, director of strategy for global natural gas and LNG markets at JP Morgan.
Under these conditions, Westerners should not be in too much of a hurry to take action on the Russian energy sector, in the name of European interests, and confine themselves to suspending the non-operational Nord Stream 2, which also has the advantage of settling the dispute between Chancellor Olaf Scholz and his Green allies in the coalition.
