It’s been another wild day for commodity markets, as broadening Western sanctions over Russia’s invasion of Ukraine spark fears of oil and gas supply disruptions.
Crude oil prices skyrocketed as high as $112 per barrel during Wednesday’s trading session, with markets bracing for potential supply disruptions as the Russia-Ukraine crisis continues to escalate. “Oil has been pushing higher on growing perceptions that Russian oil is unable to be ‘transacted’. Although oil is not technically under sanction, traders are understandably nervous about taking delivery of Russian crude, let alone storing, shipping, and ultimately selling it,” said ED&F Man Capital Markets analyst Edward Meir to Reuters.
OPEC members, for their part, agreed to boost output levels by another 400,000 barrels per day come April during their latest monthly meeting, while International Energy Agency member countries decided to release 60 million barrels of oil from emergency oil reserves in an effort to avert a potential shortfall in global oil supply should the conflict intensify further.
Natural gas markets were also not immune to investors’ supply concerns over the Russia-Ukraine conflict, with European gas prices smashing above $2,200 per 1,000 cubic meters for the first time on record. Uncertainty continues to mount surrounding supplies to the EU, particularly after Germany axed the Nord Stream 2 certification process indefinitely last week.
In fact, fears over supply disruptions have become so rampant, that some European nations are reverting to alternative natural gas sources— even if they don’t meet environmental standards. In a rather ironic twist of events, Poland is expected to restart construction of the Danish section of the Baltic Pipe, which was previously suspended in 2019 due to the Danish Environmental Protection Agency’s ecological concerns at the time.
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With the Gazprom-owned pipeline connecting Russia to Germany via the Baltic Sea no longer a viable option, Poland is forced to secure natural gas supplies from the Norwegian gas fields, explained Danish network operator Energinet. With a new environmental permit now issued from the Environmental Protection Agency, the operator said the pipeline will be partially functional come October, before reaching full capacity of 10 billion cubic meters by January of next year.
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