European gas rise …on Russia supply fears, lower LNG flows.
TTF closed at $56.27 per metric million British thermal units (mmBtu) yesterday, up $16.21 from Tuesday. The intensified military action in Ukraine as well as new sanctions on Russia, including the ban of Russian ships to the UK ports were adding to the bullish sentiment as well. The draft for the new German storage legislation enforcing certain minimum filling percentages by 1 August (65%), 1 October (80%) and 1 December (90%) provided additional support.
The highly unpredictable geopolitical situation and risk for further escalation and new sanctions are likely to support prices further. U.S. natural gas futures rose about 4% to near a four-week high yesterday, gaining some rare support from surging global oil and gas prices as the Russia-Ukraine conflict stokes energy supply concerns. Since the start of the year, the U.S. gas market has mostly shrugged off what was happening in Europe, focusing more on domestic weather and supply and demand.
However, it is hard to ignore the 50% increase in European gas futures yesterday, especially since those higher overseas prices will keep demand for U.S. LNG exports strong for months to come.
Oil price blasts US$100+, with few alternatives for Russian supply.
Oil surged beyond $110 a barrel yesterday, extending its rally since Russia invaded Ukraine seven days ago, on expectations that the market will remain short of supply for months to come following sanctions on Moscow and a flood of divestment from Russian oil assets by major companies. The market rallied into the close of trading on heavy volume, with global benchmark Brent crude ending the day at its highest close since June 2014, while U.S. crude’s settlement was its highest since May 2011.
The oil rally has been dramatic, with Brent gaining over 15% this week alone as the West responded to Moscow’s invasion with numerous sanctions, which have targeted financial transactions and banks, designed to hammer Russia’s economy. While the energy sector was not specifically targeted, the sanctions have hampered exporting capabilities from Russia. Relief in the form of more supply is unlikely in the near-term. OPEC and allies – which include Russia – stuck to their long-term plan to boost output by just 400,000 barrels per day at a brief meeting yesterday.