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Russia Threatens $300/Barrel Oil if The West Cuts Energy Supplies to Russia

Russia Threatens $300/Barrel Oil if The West Cuts Energy Supplies to Russia

In response to sanctions imposed,
Russia threatens that oil could skyrocket to $300/Barrel,
effectively crushing the European economy.

If governments follow through on threats to stop buying energy from Russia, Western countries might face oil prices of over $300 per barrel and the eventual shutdown of the main Russia-Germany gas pipeline, a senior minister said on Monday.

On Monday, oil prices rose to their highest level since 2008 after US Secretary of State Antony Blinken indicated the US and its European partners were considering blocking Russian oil imports.

“It is very evident that rejecting Russian oil would have disastrous effects for the world economy,” Russian Deputy Prime Minister Dmitry Rogozin said.

In a statement shown on state television, Minister Alexander Novak stated.

“The price increase would be unpredictably high. It would cost at least $300 per barrel.”

According to Novak, replacing the volume of oil received from Russia would take more than a year, and Europe would have to pay much higher rates.

“European leaders must be honest in their warnings to people and consumers,” Novak added.

“Go ahead and reject Russian energy supply if you want to. We’re prepared for it. We know where the volumes may be redirected.”

Novak said Russia, which provides 40% of Europe’s gas, was fully complying with its responsibilities, but that it would be absolutely within its rights to react against the European Union after Germany blocked the Nord Stream 2 gas pipeline’s certification last month.

“We have every right to take a matching decision and impose an embargo on gas pumping via the Nord Stream 1 gas pipeline in connection with… the imposing of a restriction on Nord Stream 2,” Novak added.

“We haven’t made such a choice yet,” he remarked. “However, European politicians’ words and charges against Russia drive us in that direction.”

JP Morgan estimates that Russia produces 12% of the world’s total supply of oil. But almost half of what Russia produces goes to Europe, verses only 3% going to the United States.

As for natural gas, Russia produces about 17% of the world supply and about 40% of that goes directly to Europe as well.

If the Russians were to cut off supply in retaliation, it would put all of Europe in an incredibly tough position.

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Russia Threatens $300/Barrel Oil if The West Cuts Energy Supplies to Russia

 

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Second Biggest Oil Company in Russia Calls for An Immediate End to the War

Second Biggest Oil Company in Russia Calls for An Immediate End to the War

Russian owned Lukoil supplies 2% of the world’s supply of oil and is calling for an end to the war

President Vladimir Putin’s second-largest oil business has broken ranks with him.

Lukoil, which employs over 100,000 people and generates more than 2% of the world’s crude oil, has called for an end to Russia’s conflict in Ukraine.

In a message to shareholders, employees, and customers, the company’s board of directors said it was “asking for the military conflict to be ended as quickly as possible.”

“We send our heartfelt condolences to all those who have been impacted by this tragedy. We firmly support a long-term cease-fire and a peaceful resolution of disputes via serious dialogue and diplomacy,” the board stated.

Vagit Alekperov, chairman and CEO of Lukoil (LUKOY), is one of Russia’s wealthiest men. According to Reuters, the former Caspian Sea oil rig worker and his deputy, Leonid Fedun, possess the bulk of Lukoil’s shares.

The corporation is Russia’s second largest oil company, behind state-owned Rosneft, with activities in dozens of countries across the world.

It now faces significant difficulties as traders avoid Russian oil for fear of falling foul of Western sanctions, which do not specifically target fossil fuel shipments.

Following the invasion, Lukoil shares listed in London have lost nearly all of their value. On Thursday, trading in the company’s stock was halted.

In the United States, where 230 Lukoil fuel outlets are controlled by American franchisees, the oil giant is already facing demands for a boycott. The majority of Lukoil service stations are located in New York, New Jersey, and Pennsylvania.

Russian billionaires Mikhail Fridman and Oleg Deripaska broke ranks with the Kremlin earlier this week and urged for an end to the conflict. In a message to staff, Fridman, who was born in western Ukraine, expressed his desire for the “bloodshed to halt.”

Fridman is the chairman of Alfa Group, a private corporation with operations in banking, insurance, retail, and mineral water manufacturing largely in Russia and former Soviet republics.

He is also the chairman of Alfa Bank, Russia’s fourth largest financial services company and largest private bank. Sanctions were imposed on Alfa Bank last week, preventing it from raising funds in the US market.

Deripaska built his wealth in aluminium and was sanctioned by the US in 2018.

The crippling sanctions imposed on Russia are having a crippling effect on their economy and are putting increased pressure on Russian business owners who deal in international markets.

And yet the war continues on…at least for the moment.

Second Biggest Oil Company in Russia Calls for An Immediate End to the War

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Energy Prices Spike: Natural Gas +60%, Oil The Highest Since 2014

Energy Prices Spike: Natural Gas +60%, Oil The Highest Since 2014

As the Russian military rolls closer to Kyiv,
crude and natural gas spike to eye watering levels as the world fears a supply shock.

On Wednesday, as Russia’s increasing military assault in Ukraine raised fears of a supply shock, global crude oil prices soared to more than $110 per barrel and natural gas prices soared to a new high in Europe.

Brent oil futures, the worldwide benchmark, increased by over 9% to $113.65 per barrel, the highest since 2014. Oil futures in the United States rose more than 8% to $112.25 a barrel. Wholesale natural gas prices in Europe soared by 60% to a record high of €194 ($215) per megawatt hour.

This is more than double what it was on Friday.

Louise Dickson, senior oil market analyst at Rystad Energy, stated, “The market fear is here. The first higher price reaction following the commencement of the crisis in Ukraine six days ago is just becoming stronger.”

Western sanctions imposed in the aftermath of the invasion of Ukraine have not directly affected Russia’s energy resources. However, if Russia continues its offensive, the US and Europe may be forced to play this major card.

On Wednesday, White House press secretary Jen Psaki told CNN, “It’s still on the table, it’s not off the table.”

President Joe Biden, on the other hand, does not want to “topple the global oil markets or the global marketplace, or harm the American people more with increased energy and gas costs,” according to her.

Moscow is already finding it more difficult to sell supplies of Russian crude oil to merchants and refineries concerned about getting caught in the crossfire of financial-system penalties. Tanker operators are apprehensive of the threat to ships in the Black Sea, and large international oil firms are abandoning operations there.

brent crude oil price

According to Commerzbank analysts, Russia’s hallmark Urals oil grade was selling at a $18 per barrel discount to Brent crude on Wednesday as customers ignored Russian supplies. According to the researchers, the discount hasn’t been this large since the Soviet Union’s demise.

“Oil price differentials indicate a clear reticence to buy Russian crude,” said Shin Kim, head of oil supply and production research at S&P Global Commodity Insights. “There remains to be [a] danger of new sanctions that might indirectly or directly damage oil purchases or supplies.”

Despite efforts by the West to calm markets, the enormous price increases risk stoking already high global inflation. The United States and 30 other International Energy Agency members approved the release of 60 million barrels of emergency oil reserves on Tuesday, enough to replace about two weeks of Russian oil supplies.

“In the end, this will not be enough to calm the market. It’s a band-aid approach, to be sure.” RBC Capital Markets managing director of global energy strategy Michael Tran said.

Fuel will become more costly throughout the world as a result of the massive price hikes, raising the cost of travel and commuting. They will also raise inflation and may slow economic development, making choices by global central banks to combat increasing prices more difficult.

Investors fear that as a result of the crisis in Ukraine — a critical pipeline route, more Western sanctions that might target Russia’s economy, or retaliation by Moscow — Russian energy exports could be reduced or terminated.

“Buyer interest in Russian oil is dwindling,” according to Commerzbank analysts. “An interruption of Russian oil shipments looks to be increasingly priced in,” they noted.

According to Alex Froley, a market analyst with Independent Commodity Intelligence Services, Russian natural gas is still flowing to Europe. However, he stated that there is “a lot of ambiguity and fear about how things may evolve.”

According to Froley, the United Kingdom has blocked Russian-owned and controlled ships from entering British ports, potentially disrupting liquefied natural gas supplies from Russia, which account for between 3% and 4% of the country’s gas supply.

“Traders may be apprehensive if continental Europe follows suit and imposes a similar embargo on Russian ships,” he warned.

OPEC Sitting On Their Hands

On Wednesday, the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, decided to adhere to their plan of gradually adding oil to the market, despite demand from developed nations to do more to lower prices.

In a statement, the Saudi-led group OPEC said it will boost supply by 400,000 barrels per day in April, a small fraction of Russia’s 10 million barrels per day crude oil output.

“Recent oil market fundamentals and consensus on its forecast pointed to a well-balanced market, and current volatility is triggered by current geopolitical developments rather than changes in market fundamentals,” OPEC stated.

More Iranian barrels might be put on the market as a result of nuclear talks between Iran and the US, but this would not help the situation in the short term.

Toxic Investment: The Exodus From Russia

Many of the world’s largest oil firms are pulling out of Russia or deferring new investments in exploration and development projects.
ExxonMobil said on Tuesday that it was abandoning its last project in Russia, Sakhalin-1, which was characterized as “one of Russia’s largest single international direct investments.”

The project was operated by an Exxon affiliate, and the company’s decision to exit Russia after more than 25 years would mark the end of the company’s involvement in the country.

BP, Shell, and Norway’s Equinor all said this week that they plan to quit their Russian operations, which would cost them billions of dollars. TotalEnergies, a French energy company, has ceased fresh investment.

Energy Prices Spike Natural Gas 60 Oil The Highest Since 2014

 

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