New sanctions against Russia cause oil and gas prices to rise sharply

Growing concerns about Russian energy supply disruptions are sending oil and gas prices sharply higher at the start of the new trading week. The Brent futures contract expiring in April rose to a peak of USD 105 per barrel after the close of trading today, the May contract, which is already much more liquid, rose to USD 101.3, and the WTI price rose to USD 99. However, oil prices remained below the highs recorded last Thursday. In the meantime, prices have come back noticeably, but they are still trading around 4% higher than on Friday. The European natural gas price (TTF, 1-month forward) rose by as much as 36% to EUR 119 per MWh shortly after the opening and is still trading not far from this level.

The reason for the strong price increases are the Western sanctions against Russia, which were tightened again noticeably over the weekend. Individual Russian banks were excluded from the international payment system SWIFT. In addition, the assets of the Russian central bank in the EU were frozen in order to make support purchases in favour of the rouble more difficult. A major British oil company also announced yesterday that it would divest its stake in Russia's largest oil company, even taking a loss of $25 billion. Russia could reduce or even stop energy supplies to Europe in retaliation for these drastic measures. However, there is no indication of this yet. Russian gas deliveries to Europe actually rose on Friday to their highest level since December and the preliminary data for today do not yet show a fundamentally different picture. The sanctions and the exodus of Western oil companies are likely to lead to lower Russian oil and gas production in the medium to long term, as investments in maintaining production or developing new sources will become much more difficult.

Source: Commerzbank Research, Photo: Fotolia