Photo: Oil barrels (for illustration purposes); Credit: Equinor

Oil price soars past $100 mark as Russia-Ukraine crisis escalates

Oil prices soared on Thursday with Brent surging over the $100 a barrel mark for the first time in eight years as Russia launched an attack on Ukraine, sparking fears that a war in Europe could disrupt energy supplies.

After months of tensions and weeks of reports that Russia is preparing an attack on Ukraine, Russia’s President Vladimir Putin on Thursday launched a military attack on several Ukrainian cities.

In a tweet this morning, Ukraine’s Foreign Minister, Dmytro Kuleba, said that Putin had launched a full-scale invasion of Ukraine.

He also called for immediate action from foreign governments, including putting “devastating sanctions” on Russia, the provision of weapons for Ukraine, and financial and humanitarian assistance.

Ukrainian President, Volodymyr Zelenskyy, held an urgent meeting this morning with the leadership of the government, representatives of the defence sector, and the economic bloc. The President also spoke about negotiations with world leaders to form an international coalition to end Russian aggression.

The escalation of this crisis sparked fears in the market. As a result, according to a report by Reuters, Brent crude rose to as much as $103.78 a barrel, the highest since 14 Aug 2014, and was at $103.18 a barrel at 0830 GMT, up $6.34, or 6.5%. Furthermore, U.S. WTI crude futures jumped $5.48, or 6%, to $97.58 a barrel, after rising to as much as $98.46, the highest since 11 August 2014.

Earlier research from the energy intelligence group, Rystad Energy, estimated that an escalation of military tensions between Russia and Ukraine could put up to 155 billion cubic meters per year of natural gas imports to Europe at risk, if the conflict causes Russia to halt deliveries. The figure corresponds to 30% of Western Europe’s annual gas demand, according to Rystad.

As detailed by Rystad, of the 155 Bcm of piped gas Europe imported from Russia in 2021, 40 Bcm was piped through Ukraine. This supply would likely be disrupted in the event of military escalation between the two countries, Rystad said earlier in February.

The U.S. has already imposed sanctions on Russia’s Nord Stream 2 gas pipeline while Germany halted the process of certifying it. Announcing the first tranche of sanctions against Russia, U.S. President Joe Biden said on Wednesday that Nord Stream 2 “will not, as I promised, move forward.”

German Chancellor, Olaf Scholz, previously said that the project could not go ahead in these crisis circumstances. What this means is that, without the certification, the Nord Stream 2 cannot begin operating.

Nord Stream 2, worth $11 billion, is designed as two parallel 48-inch lines, some 1,200 kilometres long, each starting southwest of St. Petersburg and ending at the German coast at Greifswald.

Earlier this week, energy consultancy Wood Mackenzie said that, despite fears that Europe might face a gas crunch following the cancellation of Nord Stream 2, Europe is currently in a better situation than it was at the start of 2021/22 winter.

Kateryna Filippenko, principal analyst, Europe gas research, said: “Overall, the current supply and storage situation means Europe is in a better position both to navigate 2022 without Nord Stream 2 and to prepare for the next winter.”

However, Filippenko expects 2023 to be more challenging as Europe may struggle to refill its storage to a comfortable level through summer 2023 and prepare for winter.

Condemnation of Russia’s attack on Ukraine

U.S. President Joe Biden condemned the “unprovoked and unjustified attack by Russian military forces.”

After talking to Zelenskyy, Biden said: “I briefed him on the steps we are taking to rally international condemnation, including tonight at the United Nations Security Council. He asked me to call on the leaders of the world to speak out clearly against President Putin’s flagrant aggression, and to stand with the people of Ukraine. Tomorrow, I will be meeting with the Leaders of the G7, and the United States and our Allies and partners will be imposing severe sanctions on Russia. We will continue to provide support and assistance to Ukraine and the Ukrainian people.”

NATO Secretary-General, Jens Stoltenberg, also condemned the attack on Ukraine, calling it “a grave breach of international law & a serious threat to Euro-Atlantic security.”

“Once again, despite our repeated warnings and tireless efforts to engage in diplomacy, Russia has chosen the path of aggression against a sovereign and independent country,” the Secretary General said in a statement this morning.

Stoltenberg is expected to brief the media today at around 12:00 (CET) after an extraordinary meeting of the North Atlantic Council on “Russia’s unprovoked and unjustified attack on Ukraine.” The event will be streamed live on the NATO website.

However, Putin sees the situation differently. In an address on Thursday, he spoke about the “tragic events in Donbass.” Reminding of his previous address made on 21 February 2022, he said: “I spoke about our biggest concerns and worries, and about the fundamental threats which irresponsible Western politicians created for Russia consistently, rudely and unceremoniously from year to year. I am referring to the eastward expansion of NATO, which is moving its military infrastructure ever closer to the Russian border.”

Putin further said in his address: “These past days NATO leadership has been blunt in its statements that they need to accelerate and step up efforts to bring the alliance’s infrastructure closer to Russia’s borders. In other words, they have been toughening their position. We cannot stay idle and passively observe these developments. This would be an absolutely irresponsible thing to do for us.”

Further condemnations of Russia’s actions came in a joint statement on Thursday as President Charles Michel of the European Council and President Ursula von der Leyen of the European Commission condemn “in the strongest possible terms Russia’s unprecedented military aggression against Ukraine.”

“We call on Russia to immediately cease the hostilities, withdraw its military from Ukraine and fully respect Ukraine’s territorial integrity, sovereignty and independence. Such use of force and coercion has no place in the 21st century. The EU stands firmly by Ukraine and its people as they face this unparalleled crisis,” the statement said.

Russia is now facing more sanctions as President Michel has urgently convened an extraordinary meeting of the European Council to discuss the crisis and further restrictive measures. These will impose massive and severe consequences on Russia for its actions. President von der Leyen and High Representative Borrell will outline a further sanctions package being finalised by the European Commission and the EEAS in close coordination with partners.