Oil and gas prices soar as Ukraine conflict escalates

The price of a barrel of oil rose again on Wednesday as the conflict in Ukraine raged.

A barrel of Brent Crude hit $111, a seven-year high, as tough sanctions against the Russian economy were imposed.

Future gas prices on the European wholesale natural gas market soared more than 50% to 185 euros per megawatt hour, before falling slightly.

That means oil is 15% higher than it was before Russia invaded Ukraine last Thursday.

(PA graphics)

The sanctions have so far excluded energy shipments from Russia, the world’s largest exporter of gas and oil.

With large parts of Europe dependent on Russian gas, sanctions have not been imposed on payments for energy and shipments can still cross the continent.

But the market fears that tougher sanctions will start to impact the energy market, and with Russia’s financial system heavily restricted, traders are reluctant to engage.

The government in Westminster has banned any Russian ships from docking in the UK, including those carrying liquefied natural gas used to generate power stations.

The International Energy Agency said global energy security was at risk as it released more oil into the market in a bid to calm prices.

US President Joe Biden is also under pressure to stop Russian oil imports, although no decision has been made.

Joe Biden
Joe Biden (Saul Loeb/AP)

Fawad Razaqzada, market analyst at ThinkMarkets, said: “Western sanctions on Russia have so far shut out energy shipments, but traders have driven oil and coal prices sharply higher anyway, gas prices also remaining supported.

“The crude oil market was already tight, even before Russia invaded Ukraine.

“But now there are fears that due to the current situation, foreign refiners are very reluctant to buy crude oil from Russia, with some banks also refusing to finance shipments of Russian raw materials.

“Indeed, this equates to a real decline in Russian crude oil exports. Moscow must find ways to keep selling its oil, otherwise there is the risk of an even bigger oil shock.

“The unthinkable would be if new measures were introduced that directly targeted Russia’s oil and gas exports, or if Russia retaliated by cutting off the supply of these raw materials to its western neighbors in Europe.

“An energy-dependent Europe will want to avoid this situation, almost at all costs. But merchants are taking no chances as fighting in Ukraine escalates, while international payments to and from Russia become increasingly difficult with the West’s decision to exclude several Russian banks from the global banking system. Swift financial messaging.

Talks with Iran over its nuclear ambitions continue and there are hopes the country could re-enter the oil market, which would stabilize prices.

Ryanair boss Michael O’Leary said the West must work to bring down oil prices.

Speaking to Sky News, he said: “We still believe, hopefully, that the Ukrainian situation will be resolved in favor of Ukraine in the short or short term, but there is no doubt that if the prices of oil remain high, around $100 a barrel, we’re going to see a dramatic increase in supply.

“The Iranians are talking to the Americans about resolving the nuclear talks. They are already loading tankers to export oil.

“The most important thing we can do in the West is to increase oil production, because what hits Russia the hardest are low oil and gasoline prices.”

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